KUALA LUMPUR: Kenanga Investment Bank Bhd has revised down Malaysia’s 2023 manufacturing index growth forecast to 2.4 per cent from 5.0 per cent previously (2022: 8.2 per cent), given the considerably lower-than-expected print in April and the subdued year-to-date performance.
The expectation is partly based on its newly revised 2023 export forecast of minus 4.2 per cent (2022: 25.0 per cent) amid the prospect of slower global growth, it said.
“Likewise, we expect the manufacturing index to remain subdued in May as Malaysia’s purchasing managers’ index (PMI) worsened to 47.8 (April: 48.8).
“However, manufacturing output may still improve in the second half of the year, underpinned by robust domestic demand and as China’s recovery is expected to gain momentum,” Kenanga said in a research note today.
Kenanga also maintained its 2023 gross domestic product growth forecast for the country at 4.7 per cent (2022: 8.7 per cent) for the time being, on the basis that “domestic demand should stay robust amid a sustained recovery in tourism, strong labour market conditions, and a steady expansion in services.”
“These should alleviate the weakness in export-oriented manufacturing,” it said.
Public Investment Bank Bhd said it expects the performance of Malaysia’s manufacturing output to closely follow the monthly global semiconductor sales, which have been in a cyclical downturn, registering a negative growth rate of 21.6 per cent year-on-year in April.
The World Semiconductor Trade Statistics (WSTS) has adjusted its forecast to reflect a more substantial double-digit decline of minus 10.3 per cent (US$515 billion) in the worldwide semiconductor market for 2023, following modest growth of 3.3 per cent in 2022.
Nevertheless, a robust recovery is anticipated in 2024, with an estimated growth rate of 11.8 per cent.
“Looking ahead, Malaysia’s PMI is expected to align with the global PMI trend and persistently fall below the expansion threshold of 50 points,” it said in a note.
The global PMI remained below this threshold at 49.6 in May, reflecting manufacturers’ diminished optimism at its lowest level since December.
Public Invest said the industry’s outlook remains grim, with a sharp decline in new export orders.
Additionally, businesses in Malaysia are facing challenging conditions, both domestically and internationally, with dwindling orders.
On the business sentiment index, it continues to remain below the crucial threshold of 100, standing at 95.4 in the first quarter of this year compared to 85.9 in the preceding quarter, it noted. – BERNAMA
