MIDF Research keeps 2023 IPI at 3.5%

MIDF Research has maintained its forecast that Malaysia’s Industrial Production Index (IPI) will moderate at 3.5% in 2023 despite the overall economic indicator rose by 6.9% last year.

“For 2023, we maintain our projection that IPI growth will moderate to +3.5%, factoring in moderation in external demand and the diminished low-base effect,” said MIDF Research in a report today.

Apart from sustained rise in domestic spending, the research house foresee production will grow further on the back of improved supply conditions, easing cost pressure and better supply of foreign workers.

However, it remains cautious that 2023 IPI outlook may be negatively impacted by sharper than expected fall in global demand, prolonged high inflation, and renewed risk of supply disruptions. 

Despite the weaker-than-expected December 2022 IPI growth, the country’s overall IPI rose by 6.9% in 2022 which was not too far from the research house estimate of 7%.

MIDF Research said production continued to grow last year after a 7.2% growth in 2021 as companies ramped up production to cope with growing demand, both from domestic and export markets.

On the back of economic reopening and transitioning into the endemic phase, MIDF Research said it noticed that 2022 IPI growth was underpinned by stronger output growth in domestic-oriented sectors, which grew faster at 12% (2021: 10.7%); in contrast to moderate output growth of 7% in export-oriented sectors (2021: 13%).

In a statement today, chief statistician Datuk Seri Dr Mohd Uzir Mahidin said for the final quarter of 2022 (4Q22), the index grew at a slower rate of 4.1% compared to 4Q21, attributed to the growth in manufacturing (4%) and mining (6.2%) indices.

“In December, the index’s growth slipped to % from 4.8% recorded in November, driven by the mining index (4.1%) and manufacturing index (3%),” he said in a statement.

He said output in the manufacturing sector expanded by 3% in December 2022, driven by electrical and electronics products (7.2%); transport equipment and other manufactures (8.5%); food, beverages and tobacco products (3.4%); and non-metallic mineral products, basic metal and fabricated metal products (2.2%).

Smaller declines were recorded in the output of petroleum, chemical, rubber and plastic products (-0.9%); and textiles, wearing apparel, leather products and footwear (-0.5%).

Meanwhile, the production of wood products, furniture, paper products and printing continued to decline by 4.3% (November 2022: -3.6%). — TMR / pic by Muhd Amin Naharul