A SUBDUED economic outlook and weakened industrial production – particularly in the manufacturing sector – will weigh on power demand and consumption, and hence generation by extension.
This has prompted Fitch Solutions Country Risk & Industry Research to revise downward Malaysia’s power consumption and generation growth for 2021 and 2022 in view of persistent headwinds from a COVID-19 resurgence in the market.
The research house now expects power consumption to grow by 1.5% compared to its initial forecasts of 3.5% in 2021, and 4.1% in 2022 (from 6% previously) with further downside risks.
“This stems from our expectations for impacts from the outbreak and extended containment measures to weigh heavily on its manufacturing, exports and private consumption, alongside a relatively subdued economic outlook which will serve to constrict power consumption,” opined Fitch Solutions in its latest commentary.
“Our previous forecasts have only accounted for the risk of nationwide lockdowns persisting in 1H 2021 and not for them to run into 2H 2021.”
Against the likelihood of the nationwide lockdown likely to last for most of 2H 2021, there is further risk of localised lockdowns into 2022, given the new daily caseloads have broken consecutive records in recent weeks, Fitch Solutions further expects the Malaysian economy and its manufacturing sector in particular to remain under heavy pressure in the near term.
While the Government has opted to allow more industries to operate in spite of the lockdown, renewed containment measures under the movement control order (MCO) have inevitably weighed on both domestic manufacturing and production.
“In addition, global surging prices for raw materials and freight across recent months have also led to some supply chain disruptions and production delays,” observed the research house.
“On a demand front, we believe that both domestic and external demand will likely also remain weak over the coming months as most of Asia is also struggling with COVID-19 resurgences with the Delta Variant alongside the slowing recovery in the European Union (EU) and US.”
Since June, Malaysia’s Manufacturing Purchase Managers’ Index (PMI) have fallen back into contractionary space, hitting levels close to the initial outbreak in 2020.
“We note that Malaysia’s industrial consumption, particularly in its large manufacturing sector, accounts for nearly 50% of total power consumption. As such, we expect this to weigh significantly on power consumption over the near term,” added Fitch Solutions. – Aug 25, 2021
