IPI figures to boost GDP

Malaysia records robust export growth in 1Q

“The consumer and construction-led sectors are poised to gain momentum, reaping the benefits from the various measures introduced.”

Aminvestment Bank Research

PETALING JAYA: The latest Industrial Production Index (IPI) figures confirm the positive outlook for the country’s upcoming first quarter gross domestic product (GDP) numbers but cautiousness remains key.

With global trends moving in Malaysia’s favour, the country posted robust export growth in the opening months of the year.

Domestic demand, which makes up about 60% of GDP, is also expected to see a lift from the winding back of Covid-19 restrictions, according to Moody’s Analytics economist Denise Cheok in a report.

However, she noted that the Russian invasion of Ukraine and a slowdown in China’s growth remained downside risks.

“We remain cautiously optimistic about Malaysia’s growth in the coming months,” she said.

The country’s IPI saw an increase of 5.1% in March compared with the same month of the previous year, buoyed by growth in three indices, namely manufacturing, electricity and mining.

Growth for export-oriented industries was mainly supported by the manufacture of computers, electronics and optical products, and the manufacture of coke and refined petroleum products.

Aminvestment Bank Research, in its report, noted that electrical and electronics (E&E) remained the key growth driver and is expected to play a major role in 2022.

“Besides, both the consumer and construction-led sectors are poised to gain momentum, reaping the benefits from the various measures introduced.

“We maintain our overall GDP growth for 2022 at 5.6% with an upside of 6% and a downside of 4.8%,” said the research house.

Looking ahead, the E&E segment would remain as a key growth driver and is expected to expand in the region of 15% against 18.2% in 2021, said Aminvest Research.

“One of the key drivers for the strong growth in this segment is the hike in the average selling price (ASP) due to the continued chip shortage which remains a concern in some sectors,” it said.

For instance, it said automotive applications were expected to experience component supply constraints – particularly in microcontrollers, power management integrated circuits and voltage regulators, extending into 2023.

Thus, they will continue to see high ASPS. The research house expected the overall emiconductor component supply constraints to ease gradually through 2022, suggesting that prices would stabilise with the improving inventory situation.

“And this would be reflected more in 2023.” Aminvest Research also said the migration to 5G is expected to also spur E&E growth as 5G smartphone unit production would surge by a whopping 45% in 2022, reaching 808 million units and representing 55% of all smartphones produced.

In its report, MIDF Research said although the IPI growth was better than expected in the first three months of this year, it remained cautious on the possible negative impact of the war in Ukraine, lockdown in China, rising production costs and shortages of materials.

“On a positive note, domestic-oriented sectors will benefit from the further reopening of the economy and relaxation of Covid-19 restrictions.”

“Overall, we maintain our projection that IPI will grow at 4.3% this year, slower than 2021’s 7.2%,” MIDF said.