By G. Sharmila
A key risk to the outlook for the Malaysian manufacturing sector is from the downside risk that the Chinese economy slumps into a hard landing or protracted period of weak economic growth, a regional economist said today.
“Such a weak growth scenario for China would have significant transmission effects to other Asian economies,” IHS Asia Pacific chief economist Rajiv Biswas told KINIBIZ via email.
“Due to Malaysia’s strong trade and investment ties with China, the Malaysian economy would be vulnerable to any further significant slowdown in China, as well as the second round impact as other Asian economies are also hit by a China slowdown, which would hurt intra-Asian trade and investment flows,” Biswas said further.
Nevertheless, he noted that Malaysian manufacturing output for the first eight months of this year had been resilient.
“The resilience of Malaysian manufacturing output, which showed +4.7% growth year-on-year during the first eight months of 2015, reflects a number of factors, notably the strong growth of electrical and electronics exports to key markets, including the US, EU and China,” he said, adding that Malaysian electrical and electronics exports have risen +16.7% year-on-year in August.
The strength of Malaysian domestic consumer demand, he said, has also supported the growth of manufacturing output, with private consumption growing by +7.6% year-on-year during the first half of 2015.
Rajiv highlighted that Malaysian industrial output had shown a strong performance in the first eight months of 2015, up +5.1% year-on-year, which is a particularly resilient outturn in contrast to weak industrial production in several other East Asian industrial economies such as South Korea, Taiwan, Singapore and Thailand during recent months.
“The strong performance of Malaysia relative to many other East Asian industrial economies during Q3 also reflects the significant depreciation of the ringgit against the US dollar over the last 12 months, which has given increased competitive advantage for Malaysian manufacturing exports against other locations in the East Asian manufacturing supply chain.
“The ringgit depreciation against the US dollar has substantially improved the relative competitiveness of Malaysian manufactured exports into the US, which is an important export market for Malaysian manufacturers of electrical and electronics products such as integrated circuits and semiconductors, as well as products such as rubber gloves and medical devices,” he said.
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