45828071_2344241278939293_7502052296847523840_o (1)

Malaysia’s Industrial Production Index Grows by 4%, Credit Rating at A- 

The country’s  industrial production index (IPI) for May 2019 rose 4.0% from a year earlier. Info Note: Industrial production index (IPI) is a measure of factory output in the manufacturing, mining and electricity generating sectors.

Minister of Finance Lim Guan Eng, shared that from January till May 2019, Malaysia’s IPI grew 3.2% compared to the corresponding period last year. Meanwhile on 3 July 2019, S&P Global Ratings’ (Standard and Poor’s) affirmed Malaysia’s issuer credit rating at A- with a stable outlook.

In contrast, industrial production in other ASEAN economies experienced contraction – factory output (in May 2019) in the Philippines (2.1%), Singapore (2.4%) and Thailand (4.0%) in May 2019.

Furthermore, Q2 2019 of the Singaporean GDP grew only 0.1% compared to last year, or shrank 3.4% quarter-on-quarter. A HSBC economist was  quoted that  this latest quarterly figure in Singapore is a “harbinger of further growth deterioration across the region”, as a result of the continuing trade war between United States and China.

“However, we (the Malaysian Finance Ministry) believes that persistent industrial production expansion for Malaysia in the month of May, together with solid expansion in exports and domestic demand, point towards sustained GDP growth in the second quarter of 2019.The World Bank forecasts Malaysia to enjoy a 4.6% GDP growth for the whole of 2019,” Lim says.

Separate data from the Department of Statistics shows that the jobless rate fell to 3.3% in May from 3.4% in the preceding month.

The strong IPI growth is reflected in Malaysia’s manufacturing sales, which grew 6.7% to RM69.7 billion in May 2019. Meanwhile, Malaysian exports expanded in May by 2.5% year-on-year, again beating the market consensus of 2.2%. Like the 4.0% IPI growth, the May 2019 export growth was due to increased global demand for Malaysian electrical & electronics, and chemical products.

The expansion of both exports and industrial production signal that the Malaysian economy is resilient in the overcoming external disruption, while benefiting from the ongoing trade war through business relocation, as well as trade and investment diversions.

Approved foreign direct investment (FDI) across all sectors for the first quarter of 2019 rose 73.4% to RM29.3 billion. The first quarter of 2019 approved FDI growth was driven by a 127% increase in approved manufacturing FDI to RM20.2 billion.

“Malaysia is a small, open economy that is deeply embedded in the global supply chain. The Government recognises the downside risk that exists from a slower global growth, especially when Malaysia’s top trade partners are experiencing an economic slowdown.

The Government is in the midst of preparing its 2020 Budget, which will take the relevant risk scenarios caused by the continuing trade war into account. In the meantime, the Government is taking a business-friendly approach to take advantage from the permanent reorientation in the global supply chain leading to investment or trade diversions to Malaysia, while pressing on with its institutional reforms,” ends Lim.