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Nikkei Markets

Malaysia's January industrial production growth lags view

Economists flag sluggish growth ahead as coronavirus mars business prospects

Workers assemble cars on an assembly line in the Proton manufacturing plant in Malaysia.    © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysia's industrial production rose at a slower than expected pace in January, driven mostly by the manufacturing sector, official data released Friday showed.

The industrial production index -- a measure of output from mines, power plants and factories -- increased 0.6% in January when compared to the same month last year, the Department of Statistics said. The median estimate in a Nikkei Markets survey was for a 0.8% on-year gain.

In December, the industrial production index had expanded 1.3% from a year earlier.

Economists said factory activity is likely to remain sluggish as the COVID-19, or coronavirus outbreak weighs on global economy, clouding business outlook and raising downside risks for the trade-reliant Southeast Asian nation.

"COVID-19 and slowdown in China weaken global demand, thus affecting Malaysia's manufacturing output, while oil price war causes average global oil price to decline," MIDF Amanah Investment Bank said in a note to clients.

Malaysian authorities have detected more than 150 infections of the highly-contagious coronavirus so far. The virus, which spreads rapidly and easily, has infected more than 135,000 people and killed nearly 5,000 worldwide, prompting several countries to impose lockdown and travel restrictions.

That has disrupted global economic activities as factories and offices suspended their operations, while private consumption fell with some governments ordering their people to stay at home and away from crowded places.

Output from Malaysia's key manufacturing sector in January increased 2.1% from a year earlier, slower than the 3.4% year-on-year growth in December, while mining activity declined 3.9%. Electricity generation fell 0.01% year-over-year.

Manufacturing sales for January rose 2.6% to 118.2 billion ringgit ($27.52 billion).

Data released last week showed a 1.5% year-on-year contraction in exports, dragged down by lower shipments of key electrical and electronics products amid weakening demand from China. Imports fell 2.4% from a year earlier as demand for capital goods and consumption goods eased.

Although January's weak export print in-part owes to fewer working days due to Lunar New Year closures, a greater impact from COVID-19 virus will reflect in February's reading, analysts said.

Malaysia has unveiled a $4.75 billion stimulus package to counter the slowdown, and the government has also said it will review the package to assess whether any additional support is needed. The third-largest Southeast Asian economy is forecast to expand between 3.2% and 4.2% this year.

--Jason Ng

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