KUALA LUMPUR, May 5 (Xinhua) -- Malaysia's manufacturing outlook is becoming more challenging despite resilient near-term activity, as easing geopolitical risks offer only partial relief from elevated costs and supply chain pressures, economists said Tuesday.
Business confidence among manufacturers has slipped to an eight-month low and remains below historical norms, according to BIMB Securities, reflecting lingering concerns over Middle East tensions.
"Malaysia's diversified and consumption-led economic structure should provide a degree of resilience, with industrial production and goods exports projected to expand by 3.4 percent and 3.5 percent, respectively, in 2026, supporting a gradual normalization of activity amid a softer global growth environment," it added.
Still, MBSB Research warned that the manufacturing outlook is turning more challenging, with recent gains in purchasing managers' index (PMI) readings partly driven by precautionary stockpiling ahead of a tougher operating environment.
"Energy price shocks and elevated oil prices, driven by the West Asia conflict, are likely to worsen material shortages, disrupt supply chains, and keep production costs elevated, thereby constraining manufacturing momentum in the near term," the research house noted.
While Malaysia's near-term outlook remains firm, underpinned by domestic demand and stock building, Kenanga Research cautioned that high logistics, energy and material costs, alongside delivery delays, will remain key headwinds as second-round effects from prolonged Middle East tensions begin to surface.
"Growth should remain robust in the first half, supported by a festive boost, resilient domestic demand and stock building activity. However, downside risks are rising in the second half as cost pressure and supply chain disruptions intensify," the research house said.
Nevertheless, it expects Malaysia's domestic resilience to cushion the impact. It therefore maintains its 2026 gross domestic product (GDP) forecast at 4.5 percent for now.
Malaysia's S&P Global Manufacturing PMI rose to 51.6 in April, a four-year high, as output expanded at the fastest pace since December 2021, supported by inventory building despite weak export demand. ■