Malaysia’s economic growth is expected to slow in the fourth quarter of 2024, despite a positive performance in the industrial production index (IPI) for November 2024. The IPI, which measures output in manufacturing, electricity, and mining, rose to 3.6% year-on-year in November, surpassing the market estimate of 2.5%. This was the highest growth in three months. Both manufacturing and electricity sub-indices saw strong growth, while the mining sub-index experienced a small decline. Month-on-month, the IPI increased by 1%, reversing a previous contraction.
However, growth in manufacturing activities slowed in the fourth quarter compared to the third quarter of 2024, leading to expectations of a moderation in overall economic output. According to TA Research, this could lead to a deceleration in GDP growth, which was 5.3% year-on-year in 3Q24. TA Research has maintained its 4Q24 GDP forecast at 4.7%, with a full-year growth estimate of 5%. Preliminary GDP estimates, set to be released later this week, are expected to provide further insights into the key drivers of growth during this period.
BIMB Securities notes that while Malaysia’s manufacturing sector is likely to benefit from continued external demand, there are risks to be considered. The December 2024 purchasing managers’ index (PMI) indicated a contraction, reflecting ongoing challenges such as a decline in external demand since March. Risks such as protectionist policies and trade disruptions under new global policies could affect Malaysia’s trade flows and manufacturing sector in 2025.
Despite these challenges, employment in the manufacturing sector grew by 1% year-on-year in November 2024, slightly up from 0.9% growth in October. On a month-on-month basis, employment increased by 0.1%, compared to 0.4% in October.
CIMB Securities also highlighted a deceleration in IPI growth from 3.9% in 3Q24 to 2.8% in the October-November period, signaling slowing industrial activity. However, the services sector’s robust performance, particularly in tourism and household spending, is expected to help mitigate weakness in the manufacturing sector.
HSBC Global Research has raised Malaysia’s GDP growth forecast for 2024 to 5.2% from 5%, and for 2025, to 4.8% from 4.6%. Despite external risks, the firm noted that strong growth in capital formation and resilient domestic demand should support the country’s economic performance moving forward.
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