KUCHING: Malaysia’s economy remains on an upward track, analysts opine in a monthly economic review, while the industrial performance index (IPI) performance is set to continue expanding but at a moderated pace in the second half of 2019 (2H19).
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) highlighted that according to the Business Tendency Survey, overall business performance is set to improve at 3.1 per cent in the third quarter of 2019 (3Q19).
“Commodity based sectors such as agriculture and mining are predicted to recover in 3Q19,” MIDF Research said.
“In addition, manufacturing sector is also expected to recover despite external headwinds. Besides that, leading index remains in negative sign but is rebounding gradually.
“The index indirectly hints the economy to continue expanding at solid pace in 3Q19 and 4Q19.”
According to MIDF Research, effects of lower overnight policy rate (OPR) are predicted to appear in 2H19 with inflationary pressure stays low and job market at full-employment condition.
“Henceforth, we expect GDP growth in 3Q19 to record above five per cent. However, trade war remains as downside risks to Malaysian economy.”
Meanwhile, on Malaysia’s IPI performance, it has been projected to continue expanding.
“Moving forward, we foresee IPI performance to continue expanding but at a moderating pace in 2H19 as trade war factor remains as a major downside risk to global trade activities and manufacturing production in particular which has the highest weightage in the overall IPI index.
“Nevertheless, effects of OPR cut, low inflationary pressure, positive progression in construction activities and stable domestic demand would provide support to the industrial production performance.”
The research arm also projected that inflation is likely to remain high in upcoming month mainly due to the lower base effect resulting from the tax holiday period last year.
“Nevertheless, RON95 price cap at RM2.08 will continue to downwardly pressure transport inflation.”