Published July 10, 2009

Fall in M'sia's industrial production slows in May

Figures boost optimism that worst of manufacturing slowdown is over

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(SINGAPORE) Malaysia's industrial production fell the least in six months in May, boosting optimism that the worst of the manufacturing slowdown may be over for South-east Asia's third- biggest economy.

Production at factories, utilities and mines dropped 11.1 per cent from a year earlier, after declining a revised 11.7 per cent the previous month, the Putrajaya- based Statistics Department said yesterday. That compares with the median forecast for an 11 per cent fall in a Bloomberg survey of 21 economists.

Malaysia's economy is expected to improve in the coming months after contracting in the first half of the year, central bank governor Zeti Akhtar Aziz said this week. Prime Minister Najib Razak is easing investment rules to attract funds into the country as he seeks to revive an economy forecast by the government to shrink as much as 5 per cent in 2009.

'Overall production output has turned after hitting the trough in February, and should continue to grind northward in the months ahead,' said Irvin Seah, an economist at DBS Bank Ltd in Singapore.

Malaysia's manufacturing output shrank 15.2 per cent in May, yesterday's report showed. Mining dropped 3 per cent, while electricity production fell 2.1 per cent. Industrial production tumbled 13.2 per cent in the first five months from a year earlier.

Gross domestic product (GDP) contracted 6.2 per cent in the first three months of the year. The economy probably performed 'very much the same' in the second quarter, Bank Negara Malaysia's Ms Zeti told reporters on Wednesday. Overseas shipments have dropped for eight consecutive months, with the most recent data showing a 29.7 per cent decline in May from a year earlier.

The Malaysian ringgit fell to the lowest in more than two months yesterday on concern that the economy slid into a recession in the second quarter amid declining exports. The currency declined 0.4 per cent to 3.5775 per US dollar as at 1.07 pm in Kuala Lumpur.

'In the short term, we see volatility in our exchange rate, just like we see volatility in the major currencies,' Ms Zeti said on Wednesday. 'As our underlying fundamentals are expected to improve, the currency can also be expected to strengthen gradually over time.' - Bloomberg