IPI outlook improving with easing of MCO 2.0
Domestic economic activities will improve further given the easing of restrictions on the economy, following the decline in new Covid19 cases as well as the total number of active cases.
MIDF Research
KUALA LUMPUR: With the easing of the Movement Control Order (MCO) 2.0 restrictions, outlook for the Industrial Production Index (IPI) is improving, with some analysts projecting that the IPI will rebound and grow by 6.3 per cent this year.
RHB Investment Bank Bhd (RHB Research) believed much of the improvement will come from the domestic-oriented industries amid the pent up demand.
“In early March, the government further eases the restrictions including reinstating some of the key states into Conditional MCO or Recovery MCO, further allowing for the ease of mobility,” the research firm recalled.
“Alongside the ease, more businesses in the tourism sector were allowed to operate.
“As such, we expect headline IPI to improve in March onwards.”
Despite the weaker-thanexpected growth in February 2021, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) maintained its projection that the IPI will rebound and grow by 6.3 per cent this year, from -4.2 per cent in 2020.
According to MIDF Research, the sustained growth in the external demand and the recovery in domestic consumer and business spending will support the recovery in local production activities.
“Domestic economic activities will improve further given the easing of restrictions on the economy, following the decline in new Covid-19 cases as well as the total number of active cases,” MIDF Research said.
“The low base effect due to the introduction of MCO last year will also contribute to stronger IPI growth this year, particularly in the 2Q21.
“Malaysia’s manufacturing PMI also improved in March 2021, indicating stabilisation in the manufacturing sector activity.”
That said, the research arm noted that there are some downside risks such as supply disruption and shortage of raw materials which could affect production activities in certain sectors.
“Moreover, renewed surge in Covid-19 cases amid slow progress in vaccination had led to prolonged restrictions in the affected countries, and this could affect the outlook for international trade activity if more restrictions will be introduced and tightened.”