Economists see Malaysia's manufacturing sector to gradually recover-Xinhua

Economists see Malaysia's manufacturing sector to gradually recover

Source: Xinhua| 2024-04-02 18:34:33|Editor: huaxia

KUALA LUMPUR, April 2 (Xinhua) -- Economists on Tuesday foresaw Malaysia's manufacturing sector to gradually recover this year after its manufacturing purchasing managers' index (PMI) fell to a three-month low of 48.4 in March.

Kenanga Research said in a note that the drop in the PMI reflects that the recovery in manufacturing conditions of Malaysia remains uncertain, which is largely due to subdued demand conditions both in the domestic and international markets.

However, the research house reiterated its outlook that domestic manufacturing conditions, especially in the export-oriented sector, will continue recovering in the coming months, especially in the second half, backed mainly by technology upcycle and China's gradual economic recovery following an expected significant stimulus injection from its government.

Growth is also expected to be bolstered by the continued expansion among regional peers and stronger-than-expected demand from advanced economies, driven by resilient domestic demand, it said.

However, its outlook's downside risk is linked to external factors, including escalating geopolitical tensions, which could disrupt the global supply chain and potentially lead to a prolonged slowdown in global trade.

Conversely, it said Malaysia could benefit from trade diversion, thanks to a significant rise in approved manufacturing sector investments recorded last year, reaching 152 billion ringgit (32 billion U.S. dollars).

"Therefore, we keep the 2024 gross domestic product (GDP) forecast of 4.5 percent to 5 percent, aligning with Malaysian government projections of 4 percent to 5 percent," it added.

Meanwhile, MIDF Research opined that the pessimism in Malaysia's manufacturing sector continued in March due to a potential surge of cost inflation following targeted-subsidy measures including diesel price, sales and service tax (SST) rate hike on certain items and adjustment of utility tariff rates.

However, the research house foresees that Malaysia's manufacturing and external trade sectors will stay in recovery mode this year, benefiting from the upturn optimism of China and other Asian peers.

"We projected Malaysia's exports to rebound by 5.2 percent in 2024," it said.

TA Securities, on the other hand, said that Malaysia's manufacturing PMI has persistently stayed below the 50-point threshold since September 2022, signaling a lack of growth.

However, the research house opined that it showed a more promising performance in the first quarter of 2024 compared to the fourth quarter of 2023, with the average PMI for the first quarter of 2024 being 49, contrasting with the 47.5 recorded in the fourth quarter of 2023.

According to TA, there is a sense of optimism for a potential improvement in the first quarter, even if it remains below the growth threshold.

This aligns with its maintained perspective, anticipating a positive momentum in the manufacturing segment's contribution to the real economy.

"This is in contrast to the 0.3 percent contraction observed in the final quarter of 2023, with a forecast of 2 percent year-on-year growth for the first quarter of 2024 in real manufacturing," it said.

Looking ahead, it said hopes of a stronger improvement in demand were key to optimism regarding the 12-month outlook for output at the end of the first quarter.

However, it noted the overall level of confidence has eased to the softest since last August, as manufacturers highlighted concerns regarding the timing of a hoped-for recovery in demand.