Local manufacturers to gain from robust investment activities, rising demand

Local manufacturers to gain from robust investment activities, rising demand

12 Feb 2025

Malaysia’s manufacturing sector is well-positioned to benefit from robust investment activities and resilient external demand, according to RHB Investment Bank Bhd.

Economist Chin Yee Sian highlighted that the sector’s positive outlook is driven by the strength of export-oriented industries and solid trade performance, contingent on favourable global economic conditions.

“This trend is further supported by continued strength in the global technology cycle and significant growth in global semiconductor sales.

“For 2025, global semiconductor sales are projected to grow by 11.2 per cent, following an estimated growth of 19 per cent in 2024,” she said in a note.

However, Chin cautioned that US protectionist policies could impact trade performance and the manufacturing sector in 2025.

She said rising protectionism and the potential escalation of trade tensions among major economies create uncertainty in the growth and export outlook.

This is due to the an abundance of uncertainties over tariff policies and the subsequent impact on global supply chains and inflation.

“While Malaysia’s export sectors are unlikely to be directly impacted by US protectionism (due to the low US trade deficit with Malaysia), the spillover through major trade partners, such as China, as well

as a potential slowdown in regional demand, could be substantial—especially in electrical and electronics (E&E) sector,” she said.

Chin added that a return to protectionist policies could escalate US-China tensions, affecting Malaysia’s role in China-centric supply chains.

To mitigate risks, she said Malaysia may strengthen ties with trade blocs like Regional Comprehensive Economic Partnership (RCEP), BRICS and Asean, while its domestic economic strength could help buffer external shocks.

In the medium term, she said Malaysia might potentially benefit from China’s efforts to reroute its manufacturing and export operations, given its significant role as an E&E exporter.

Despite short-term volatility, industrial production index (IPI) grew 4.6 per cent in December with strong manufacturing sector output.

Chin said the Malaysia’s gross domestic product growth is expected to sustain at 4.8 per cent in the fourth quarter of 2024, which will be announced on Feb 14.

Source: NST