The research house said that 2023’s moderate IPI growth, expected to be at 1.1%, was due to weakness in the trade-oriented industries.
“For 2024, we foresee IPI to grow stronger at 3.7% against 1.1% in 2023. Continued growth in domestic demand will also support IPI growth this year.
“We are optimistic, looking at the stabilisation in manufacturing activities in January 2024 as reported by the recent purchasing managers index (PMI) reports,” it said.
MIDF said there are concerns that IPI growth in 2024 might be weighed down by downside risks such as sluggish economic recovery in China and possible recession in the US.
“Moreover, companies may relook at production plans if global trade activities are affected by worsening geopolitical tension and disruptions to trade flows,” it noted.
Meanwhile, following the release of Malaysia’s IPI for December 2023 today, by the statistics department, MIDF said the index registered a marginal contraction of 0.1% year-on-year (y-o-y), which was below market expectations.
It said the weaker IPI was due to a sharper fall in output in the export-oriented sectors such as electrical equipment, refined petroleum products and chemicals.
“As expected, the trend closely followed the weaker export performance in the same month because manufacturing contributed more than two-thirds of the IPI calculation,” it said.
In line with Malaysia’s weaker export performance, MIDF said the IPI for export-oriented sectors continued to fall faster, contracting 4.1% y-o-y in December 2023, which was the seventh straight month of decline and the steepest contraction in the post-pandemic period since the recovery in June 2020.
It said that apart from the continued fall in electrical and electronics (E&E) output, lower production was recorded across various industries such as chemicals and chemical products, petroleum products, textiles, apparel, wood and wood products, and even rubber products.
“We foresee a pick-up in the export-oriented output from the low levels in 2023, which will support IPI growth this year on the back of external demand recovery.
“With countries like South Korea, Taiwan and Japan already reporting improved exports, we expect Malaysia’s exports will also pick up and rebound on the back of improving external demand,” it added.