PETALING JAYA: Malaysia’s industrial production is expected to remain resilient in 2025, supported by strong domestic spending and infrastructure projects.
However, external risks, including global trade tensions and geopolitical uncertainties, could pose challenges to the manufacturing sector.
Analysts noted that while the country’s industrial production index (IPI) demonstrated steady growth in 2024, potential headwinds remain in the year ahead.
TA Research anticipated Malaysia’s IPI resilience in 2025 due to “sustained domestic economic expansion, driven by strong household spending and ongoing infrastructure projects.”
However, it warned that “the manufacturing sector remains vulnerable to external risks, particularly the potential resurgence of trade tensions and a more protectionist stance by the United States.”
To mitigate these risks, the research house emphasised the importance of “enhancing trade diversification, strengthening domestic industrial capabilities, and attracting greater investment in high-value manufacturing.”
TA Research highlighted that “the performance in 2024 demonstrated resilience, with overall output increasing by 3.8% year-on-year (y-o-y).”
This was primarily driven by robust growth in the electricity sector (+5.6% y-o-y), the manufacturing sector (+4.4% y-o-y) and the mining sector (+0.7% y-o-y).
Nevertheless, the final quarter of the year saw some moderation, with overall output rising by 3.4% y-o-y, down from 3.9% in the preceding quarter.
HLIB Research noted that global manufacturing conditions showed signs of stabilisation, with the manufacturing purchasing managers’ index (PMI) returning to expansion territory at 50.1 in January (December: 49.6).
“As trade policy uncertainty continues to pose risks to the global outlook, Malaysia’s industrial production is expected to remain firm, supported by strong domestic spending,” it added.
HLIB Research maintained its 2025 gross domestic product (GDP) forecast for Malaysia at +4.9% y-o-y, reflecting continued economic expansion despite external uncertainties.
Meanwhile, BIMB Research pointed to growing uncertainties in Malaysia’s manufacturing sector, citing geopolitical risks, evolving trade policies and potential supply chain disruptions.
It cautioned that “although Malaysia’s export sector may not be directly affected by US protectionist measures – given the relatively modest US trade deficit with Malaysia – the indirect spillover effects through key trade partners, particularly China, and a potential slowdown in regional demand could be significant.”
The research house highlighted that the electrical and electronics (E&E) sector, a key component of Malaysia’s industrial growth, could face challenges if global supply chains are disrupted by escalating trade tensions.
BIMB Research also pointed out the importance of Malaysia’s trade ties with China, stating that “a shift toward protectionist policies could intensify US-China trade frictions, thereby jeopardising Malaysia’s strategic position within China-centric supply networks.”
However, it acknowledged that Malaysia could benefit from shifting global trade dynamics via the “China+1” strategy, as multinational corporations seek to diversify production away from China.
“Malaysia stands to attract increased foreign direct investment, strengthening its manufacturing base and enhancing trade competitiveness.”
Despite these uncertainties, analysts remained optimistic about Malaysia’s ability to navigate external challenges, while capitalising on opportunities in high-value manufacturing and trade diversification.
