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Manufacturing sector to remain lacklustre in second half, says FMM

FMM In The News: FMT, PETALING JAYA, September 11, 2023 - The manufacturing sector in Malaysia has continued to slow down in the first half of 2023 (H1 FY2023), according to a survey by the Federation of Malaysian Manufacturers (FMM).

FMM said with the global economy tilted towards the downside, the outlook for the sector in the second half (H2 FY2023) remains cautious.

“Looking ahead, the sector is likely in anticipation of the persistently weak external conditions and (waiting for) clearer domestic economic policies and directions from the government to help spur higher investments and Malaysia’s growth momentum,” it said.

This was gleaned from its FMM Business Conditions survey conducted from July 5 to Aug 18, which drew 351 respondents nationwide.

The survey tracked business confidence via the FMM Business Conditions Index (FMM BCI) and covered the actual performance in H1 FY2023 and the outlook for H2 FY2023.

The survey showed that all indicators had declined from the previous survey, except for production cost, said FMM in a statement.

FMM said in terms of sales, 27% are considering streamlining their production lines, 18% will likely engage in high-growth projects and only 8% are interested in digitalising their businesses.

The survey indicated most respondents were “cautiously optimistic” about the 2024 economic outlook, 35% said the economy would improve in 2024, 39% were neutral and 25% were pessimistic.

FMM also noted that companies are exploring the use of alternative currencies for their imports and exports to reduce US dollar reliance with the Chinese renminbi as their top choice, followed by the euro and Japanese yen.

On the impact of the fifth rise in the overnight policy rate (OPR) by another 25 basis points (bps) to 3% in May by Bank Negara Malaysia, FMM said 41% of the respondents saw a rise of between 1% and 3% in operating costs while 19% said costs rose by 4% to 6%.

Only 25% were not affected by the May OPR rise.

Should the OPR increase further by 25bps by year-end, the impact on most business revenues and profits is “expected to be minimal”, that is, less than 30% as indicated by between 35% and 44% of the respondents, FMM added.

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