KUALA LUMPUR – The higher Industrial Production Index (IPI) readings is likely to contribute to a positive GDP growth for Malaysia in the second quarter of the year (Q2 2022).
In a recent statement, Ambank Research said that it is projecting a record GDP growth of 8.4% year-on-year (Y-o-Y) for Malaysia, based on the IPI readings for June this year along with the increase in manufacturing sales for that month.
It said that on a whole, Malaysia is on track for a 5.6% GDP growth for the year, with the upside and downside potential being 6.0% and 4.8% respectively.
“The latest purchasing managers index (PMI) reading had also increased to 50.6 in July 2022, up from 50.4 in June, while the PMI survey indicated that new orders have picked up, despite the pricing pressure and capacity restrictions,” it added.
Meanwhile, Hong Leong Investment Bank (HLIB) reported that on the global front, the manufacturing PMI declined to 51.1 in July because new export orders had fallen further amid a downturn in international trade flows.
Nevertheless, the change to endemicity status for COVID-19 will continue to benefit domestically oriented manufacturing companies, it stated.
In a separate statement, it also agreed that Malaysia’s GDP growth will be stronger with the contribution of the stronger Q2 2022 IPI growth while maintaining their projection that Bank Negara Malaysia is anticipated to raise the overnight policy rate by another 25 basis points in the upcoming Monetary Policy Committee meeting in September.
In another separate statement, Kenanga Research believes that an increase in manufacturing index growth is anticipated following June’s stronger-than-expected growth, which more than offset the contraction which happened in April and May of this year.
It said that Malaysia’s PMI improvements in July indicates that manufacturing development will likely continue to be underpinned by robust domestic demand and recovering external demand.
However, it warns of the persistence of downside risks to global economic growth, with the UK and European Union still at a recession risk, although the expectations of recession in the US has subsided of late.
Despite that, Kenanga Research is maintaining its Malaysia’s GDP growth forecast of between 5.0% and 5.5% based on the optimism regarding robust domestic demand but is still cautious of the external risks to growth in the face of the supply chain disruptions and fears of global recession.
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