KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) expects sustained positive growth in the industrial production index (IPI) in the fourth quarter of 2023 (4Q23).
The investment bank said this primarily stems from the base effect despite a slump in global demand.
Nevertheless, the bank holds the expectation that the industrial sector is poised for a resurgence in 2024.
Malaysia's IPI growth remained positive at 0.6 per cent year-on-year (YoY) in Nov 2023 as compared to 2.4 per cent in Oct 2023, below market expectation of one per cent amid the persistent difficulties attributed to waning foreign demand however.
The improvement in IPI was influenced by a 1.9 per cent increase in the mining sector, though slower than 7.4 per cent in Oct, primarily supported by the positive growth in natural gas and crude oil and condensate.
During the initial 11 months of 2023, Malaysia's IPI registered a growth of one per cent YoY, marking a notable drop from the 7.1 per cent growth recorded in the same period in 2022.
Meanwhile, PublicInvest said positive momentum in industrial activity for 4Q23 is continued to be buoyed by base effects. It noted that manufactured goods continued to exhibit a negative growth of 6.7 per cent YoY in Nov 2023.
For 2023 as a whole, PublicInvest foresees a 7.4 per cent contraction in gross exports, stemming from subdued external demand from key trading partners.
Nevertheless, PublicInvest said the global semiconductor market is poised for double-digit growth in 2024, projecting a robust recovery with an estimated growth rate of 13.1 per cent, surpassing the earlier projection of 11.8 per cent.
The bank added that this forecast signals a potentially pivotal period for both Malaysia's manufacturing sector and the global semiconductor industry.
"Malaysia's susceptibility to global economic conditions, given its heavy reliance on trade, particularly in electronics and the semiconductor industry, raises concerns amid expected moderate global economic growth in 2024. "The nation's significant dependence on the economic well-being of key players like the US, China, and the European Union (EU) could lead to adverse impacts on Asean trade. "Despite these downside risks, an anticipated upturn in electronics exports is likely to partially mitigate the negative effects," it said.
Consequently, PublicInvest is projecting Malaysia's exports of goods and services to rebound with a positive growth of 5.4 per cent in 2024, following a robust 24.9 per cent growth in 2022.