In a statement, MIDF said external demand is expected to recover, supporting higher production of various export products, including electrical and electronic (E&E) products.
“The production of domestic-oriented products will also rise with growing domestic consumption,” said the investment bank.
Nevertheless, MIDF is concerned about higher inflation hurting consumer sentiment, spending plans, and other downside risks.
“The external sector could simultaneously be hit by a significant drop in overseas demand, given recent concerns over weak growth in China and the US recession.
“We are also monitoring the ongoing geopolitical conflicts which could disrupt world trade flow and the global supply chain,” it said.
According to the statistics department, Malaysia’s IPI rose 5% year-on-year (y-o-y) in June 2024, sustaining a positive momentum for six consecutive months, driven by consistent manufacturing sector growth.
Manufacturing grew by 5.2% (May 2024: 4.6%), with a 4.9% turnaround in the mining sector production (May 2024: -6.9%) and a 3.5% growth in the electricity sector (May 2024: 4.5%).
Meanwhile, Hong Leong Investment Bank Bhd opined that the global manufacturing purchasing managers index (PMI) contracted to 49.7 in July 2024 (June: 50.8), amid a decline in new orders and supply chain disruptions.
“Despite the setback, we continue to expect Malaysia’s manufacturing activity to remain expansionary, benefitting from a low base effect and sustained growth in domestic-oriented production amid a continued rise in domestic spending,” it said.
In addition, Public Investment Bank Bhd projected that Malaysia’s goods and services exports will grow by 5.4% y-o-y in 2024, underpinned by a recovery in global demand and a robust electronics sector.
“Concurrently, global gross domestic product (GDP) growth is expected to reach 3% in 2024, providing a supportive external environment.
“Malaysia’s high trade openness, as reflected in a merchandise trade-to-GDP ratio of 144.7% in 2023, underscores its vulnerability to global economic cycles, making these projections critical to the country’s economic trajectory,” it added.