KUALA LUMPUR, May 7 — Malaysia’s Industrial Production Index (IPI) is expected to remain on a rebound mode until year-end after surging 9.3 per cent year-on-year in March 2021.

Public Investment Bank Bhd (PIVB) said the growth expectation would be driven by the recovery in global pandemic conditions, global cellular network migration and full economic reopenings in Asean.

“It would also be supported by China and major economies that would push demand for, among others, electrical and electronics (E&E) and related products, and further boosted by massive global fiscal stimulus spending that will boost consumption and investment activities,” it said in a note today.

The investment bank expects the growth to be further aided by an extended period of accommodative interest rates which may last for most of 2021. 

“These will support IPI’s key components, especially manufacturing and electricity,” it said.

According to PIVB, the mining component may gain from the Organisation of the Petroleum Exporting Countries and its allies’ (Opec+) output increase, which is set to begin from May onwards.

“That is a positive development that is likely to continue until year-end, if not longer,” it added.

It noted that downside risks to IPI may come from the prospective start of the United States (US)-China trade talks which may begin in the second half of the year. 

“The uncertainty on the outcome could push investors to be cautious which may, in turn, affect demand for manufacturing products. 

“Opec+, on the other hand, could revert to its large supply cut arrangement if oil prices remain lethargic, and this may weigh on the sector’s recovery,” it said.

It added that the current slow take-up rate of the Covid-19 vaccination programme is also a concern as it could affect Malaysia’s goal to achieve herd immunity by year-end, hence further delaying the recovery of contact-sensitive industries and overall sentiment.

On Thursday, the Department of Statistics Malaysia (DoSM) announced that Malaysia’s IPI surged 9.3 per cent in March 2021 from the same period a year ago, mainly driven by the manufacturing and electricity index.

DoSM said March’s IPI was also the highest since July 2013. — Bernama