KUALA LUMPUR: Malaysia’s manufacturing sector is expected to expand by 4.4% in 2023, faster than the official forecast of 3.9%, said Public Investment Bank Bhd (Public IB).
“In line with the potential expansion in residential- and non-residential-related construction activities, coupled with the continuation of several infrastructure projects, it is anticipated that higher output in iron and steel as well as other construction-related segments will further drive the production in domestic-oriented industries,” it said.
However, the research house added that the performance of the country’s manufacturing output would also trend in tandem with the short-term cyclical weakening in the semiconductor industry, which has continued to be impacted adversely.
According to the Ministry of Finance, electric and electronic exports are projected to grow only by 1.8% in 2023, compared with 30.2% in 2022.
In addition, Public IB said while there are concerns about external uncertainties and their impact on the country’s economy this year, it believes domestic economic growth prospects would not deteriorate significantly.
This, it said, is mainly due to healthy domestic economic fundamentals such as the strong recovery of domestic demand, the stellar services sector, and the implementation of new and high multiplier infrastructure projects.
“Nevertheless, we concur with MoF that the overall balance of risks to the global and domestic growth outlook remains tilted to the downside.
“We expect that the direction of Malaysia’s manufacturing purchasing managers index (PMI) to gradually begin to follow the trajectory of the Global PMI (above 50 points), despite (the expectation that it will) soften below the 50-point expansion level in the first half of 2023,” said Public IB.
Kenanga Research said there is a possibility that the manufacturing activity could sustain a moderate recovery in the coming months, supported by the domestic-oriented sector and sustained demand for exports.
“Overall, we maintain the (Malaysia’s) 2023 GDP growth projection at 4.7%. Nonetheless, growth will be continuously supported by resilient domestic demand and policy measures highlighted in the revised Budget 2023.
“This will be further bolstered by the influx of foreign tourist arrivals and spending as well as the impact of China’s reopening,” it added. – Bernama