KUALA LUMPUR: MIDF Research expects the Industrial Production Index (IPI) in the first half of 2020 to remain sluggish amid Covid-19 fears and the global oil price collapse.
In a research note today, it said performances across major and emerging economies will also remain sluggish.
The movement control order (MCO) and lockdowns in major economies like the US, the European Union and Asia will impede global demand and export performances, it said.
“On top of that, the plunge in global crude oil prices would pressure oil-exporting economies like Malaysia, Australia and Saudi Arabia,” the research house said.
Earlier, the Department of Statistics Malaysia said the IPI grew by 5.8% in February compared with the same month last year.
MIDF said the IPI growth hit a 2.5-year high, way above market estimates of 0.7% year-on-year.
“The sudden pick-up is not unexpected as it is due to the low-base effect. The previous year’s Chinese New Year was celebrated in February while this year’s was in January.
“In addition, the Covid-19 fear effects had not taken place yet during the month and global trade was on an optimistic path amid the Phase One trade deal agreement between the US and China,” it said.
Meanwhile, RHB Research said the IPI growth reflects increased demand in anticipation of supply-chain disruption in China.
Businesses along the supply chain have started to stock up supplies amid further restrictions ahead, it said.
“The MCO imposed in Malaysia in late March should impact production going forward. We expect IPI growth to weaken, but to gradually recover in the subsequent months as the MCO restrictions are eased,” it added. – April 13, 2020, Bernama
