KUALA LUMPUR (May 8): Malaysia’s industrial production growth in March 2026 came in slightly weaker than economists’ expectations, as surveyed by Bloomberg. However, some remain optimistic on the outlook for the remainder of the year.
RHB Research and Kenanga Research have a more bullish outlook on the industrial production index (IPI) as they remain upbeat on the manufacturing sector, which accounts for the bulk of industrial output.
Kenanga Research raised its 2026 manufacturing IPI growth forecast to 4.3% from 3.5%, following stronger-than-expected output in the first quarter of 2026 (1Q2026) that is likely to carry into the second quarter, partly driven by stockpiling amid supply concerns.
“Stronger output in 1H2026 could partially offset a potential slowdown in 2H2026 should second-round effects from prolonged geopolitical tensions and commodity price volatility intensify,” it said.
“Encouragingly, the latest manufacturing purchasing managers index (PMI) rose to 51.6 in April (March: 50.7), the highest level in four years, pointing to a solid start for 2Q2026,” the research house said in a note.
Meanwhile, RHB Research said manufacturing remains supported by global electrical and electronic (E&E) demand, domestic consumption and policy measures. However, it cautioned that rising oil prices could lift production costs, particularly for fuel, transportation and other energy-intensive activities.
RHB Research in its note projected IPI growth at 4.1% in 2026, compared with 3.6% last year.
IPI growth in 2025 came in at 3.6%, data from the Department of Statistics Malaysia (DOSM) showed.
“We maintain a broadly positive outlook on the manufacturing sector, while remaining mindful of external developments amid ongoing Middle East tensions and potential shifts in US tariff policies,” said RHB Research.
On the other hand, BIMB Securities said IPI growth is likely to ease following a softer-than-expected March print, although “overall output should remain steady amid improving manufacturing sentiment”.
The research house projected IPI growth at 3.4% in 2026, supported by resilient domestic demand despite a softer global environment.
“Uncertainty persists, with the overall impact on Malaysia dependent on the scale and duration of geopolitical tensions (US-Iran),” it said.
Citing data from the Federation of Malaysian Manufacturing, BIMB Securities noted that about 72% of manufacturers have reported worsening business conditions since April due to elevated freight and logistics costs linked to the Middle East crisis. These disruptions have affected supply chains, operating costs, orders and investment decisions.
Nevertheless, it said Malaysia’s diversified, consumption-driven economy, alongside supportive policy measures, should help buffer these challenges and sustain moderate industrial growth.
The IPI — which measures output from factories, mines and utilities — rose 3.1% year-on-year in March 2026, according to the DOSM, below Bloomberg’s median forecast of 3.5% but matching February’s pace. The softer print was due to a contraction in mining activity, which outweighed gains in the manufacturing and electricity sectors.