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KUALA LUMPUR: Economists have cautioned that domestic and global economic headwinds could result in Malaysia’s industrial output growth slowing down in the second half of 2022.
This is despite the country’s industrial production index (IPI) recording year-on-year (y-o-y) double-digit growth in June 2022.
Sunway University economics professor Yeah Kim Leng told StarBiz that June’s IPI “has surprised on the upside and lifted the industrial output in the second quarter to a strong 6.9% y-o-y increase, up from 4.5% in the previous quarter.”
Yeah pointed out that manufacturing continued to gather strength, expanding by 9.3% in the second quarter from 6.3% in the first quarter while the electricity sector, reflecting higher services and production activities, rose to 5.8% from 3.7%.
“With manufacturing and services accounting for slightly over 80% of gross domestic product (GDP), the strong industrial performance affirmed the strengthening economic recovery in the second quarter following the lifting of most pandemic restrictions on April 1,” he said.
“The continuing improvement in the IPI suggests that GDP growth in the second quarter will likely hit 6% or higher,” added Yeah.,
Centre for Market Education (CME) CEO Carmelo Ferlito told StarBiz that the June IPI data is good and can be a source of optimism.
However, he expects Malaysia’s monthly industrial output growth to taper off gradually towards the year-end, with the global economy cooling sharply due to the Russia-Ukraine war, slowdown in China due to Covid-19 restrictions and aggressive monetary tightening in the United States and Europe.
“IPI growth may ease to 4% to 5% as the global economy cools in the second half,” said Yeah.
Meanwhile, Centre for Market Education (CME) CEO Carmelo Ferlito told StarBiz that the June IPI data is good and can be a source of optimism.
However, Ferlito noted that the latest 2022 IPI data needs to be read under the right perspective, as 2021 was a year characterised by the longest lockdowns.
“These signals are positive but need to be considered also as a starting point within a context of a fragile recovery. Malaysia will not be exempted from the post-Covid inflationary crisis which was predicted by CME as early as May 2021,” he said.
Ferlito added that brave measures such as a cut in government spending was very much needed and will have a contraction effect, but was absolutely necessary to put the country on the path of sustainable growth.