Public Investment Bank: Malaysia’s Industrial Production Index to remain steady in near term amid full reopening of economy

KUALA LUMPUR, April 12 — Malaysia’s Industrial Production Index (IPI) is expected to remain steady in the near term, thanks to the full reopening of the economy post-National Recovery Plan (NRP).

Public Investment Bank Bhd (PIVB) said this will be further supported by favourable external conditions amid the full reopening of the economy around the world — a boon for manufacturing component.

In a research note today, PIVB said IPI will also be driven by a lag impact of expansionary global fiscal strategies in 2021 and accommodative interest rate environment until 1H22, a boost for all the three components.

“The Organisation of the Petroleum Exporting Countries and its allies’ (Opec+) higher supply direction will also bode well for the mining component. in addition to a fair prospect for the pact to ramp-up output due to Russia-Ukraine conflict.

“This will also be topped by the commissioning of new oil field facilities in March,” it said.

On another note, PIVB highlighted that electricity output is also set to rebound, thanks to the full reopening of the economy post-NRP, and Malaysia’s transition to endemic phase of Covid-19 in April.

“The steady turnaround in the headline index forms the basis of our sanguine IPI outlook though we remained cautious, given the risks of Covid-19 outbreak in workplaces.

“Prolonged supply chain disruption and shortages in raw materials and containers is also a worry, a condition that may improve only gradually,” it viewed.

Meanwhile, the research house shared that the IPI saw a sixth straight month of expansion in February, growing 3.9 per cent year-on-year (y-o-y), driven by steady expansion in manufacturing and electricity components and aided by a marked improvement in mining.

It said the month’s achievement was also supported by favourable base effect following the lacklustre performance last year (IPI February 2021: +1.5 per cent).

Favourable operating conditions underpinned a 3.9 per cent jump in IPI in February, particularly in the manufacturing (+5.2 per cent y-o-y) component, it said.

The jump in IPI was further aided by commendable recovery in the electricity component (February 2022: +3.9 per cent) and a steady turnaround in mining (February 2022: -0.4 per cent), especially crude petroleum oils and condensates.

It added that on a month-on-month and seasonally-adjusted basis, IPI ticked 5.2 per cent faster, a rebound against January (-1.4 per cent). — Bernama