The outlook for Malaysia\u2019s manufacturing sector in the near-term is expected to be helped by the global and APAC economic outlook for 2017. IHS Global Insight forecasts that the Asia Pacific region will remain the fastest-growing region of the global economy, helped by continued rapid growth in the major Asian emerging markets of China, India and ASEAN. APAC GDP growth is forecast to be 4.7% in 2017, the same pace of growth as recorded for 2016.\u00a0<\/p>\n
IHS Global Insight forecasts that world GDP growth will improve from 2.4% in 2016 to 2.8% in 2017, helped by stronger US GDP growth. Stronger global growth will provide some positive impact effects to Malaysia\u2019s manufacturing sector, which is also being assisted by the renewed depreciation of the ringgit against the US dollar during late 2016.<\/p>\n
The recovery in global oil prices is also supporting Malaysian mining sector output, providing a further boost to overall industrial production growth. IHS Markit forecasts that the average price of Brent crude will rise from USD44 in 2016 to USD58 in 2017, remaining at around USD58 in 2018.<\/p>\n
A positive factor for the Malaysian manufacturing sector in 2017 is the positive outlook for the US economy, which remains an important market for Malaysia\u2019s exports. The US economy is forecast to strengthen in 2017, supported by the incoming Trump administration\u2019s plans for deep corporate tax cuts and a boost to infrastructure spending.\u00a0<\/p>\n
For Malaysia, the US accounted for an estimated 10.3% of total Malaysian exports in 2016, making it the third most important export market after Singapore and China.\u00a0<\/p>\n
Exports of electrical and electronic equipment, such as integrated circuits and semiconductors, account for around half of total Malaysian exports to the US. The US is also an important market for other major Malaysian manufacturing exports, including rubber products and medical equipment.\u00a0<\/p>\n
However, a key risk for Malaysia is from a China hard landing, due to significant economic and financial imbalances that continue to impact upon the Chinese economy. The downside risk scenario of a China hard landing would have negative transmission effects through the Asian manufacturing supply chain should such a risk scenario eventuate.<\/p>\n
Malaysian industrial production growth has been supported by improving mining sector production due to expansion in oil and gas output, as well as sustained robust growth in the electrical and electronics manufacturing sector, which remains a key segment of Malaysia\u2019s manufacturing sector, accounting for around 35% of total merchandise exports.\u00a0<\/p>\n
The food, beverages and tobacco sector has also performed strongly. The robust performance of Malaysia\u2019s electrical and electronics sector has been underpinned by positive momentum in semiconductors output, helped by strong growth in global demand, which is expected to continue into the first half of 2017.<\/p>\n
Global semiconductors sales were strong in the fourth quarter of 2016, with the Semiconductor Industry Association (SIA) announcing that global semiconductors sales rose 12.3% y\/y in December, with a solid start expected for 2017.\u00a0<\/p>\n
The SIA figures showed that strong annual growth of around 9.2% y\/y in 2016 for the Chinese semiconductors market was leading the upturn in global semiconductors demand. According to Global Electronics Purchasing Manager\u2019s Index (PMI) data from IHS Markit, the seasonally-adjusted Global Electronics PMI for December reached its highest since June 2010, driven by sharper expansions in output, new orders and employment, and continued to signal expansion in January.\u00a0<\/p>\n
This is supportive for the outlook for Malaysia\u2019s electronics manufacturing sector in the first half of 2017.<\/p>\n
Rajiv Biswas, Asia Pacific Chief Economist for IHS Global Insight, provides his comments on Malaysian industrial production for December 2016. Please feel free to quote or use excerpts with attribution to Rajiv Biswas, Asia-Pacific Chief Economist, IHS Global Insight. The views and opinions expressed in this article are those of the writer and do not necessarily reflect the official policy or position of Malaysian Business.<\/i><\/p>\n
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