PETALING JAYA: The industrial production index (IPI) could outperform expectations this year, supported by resilient exports, particularly electrical and electronics (E&E) products, and sustained domestic demand, although higher operating costs and uncertainties surrounding global trade remain key risks, says MBSB Research.
The research house is maintaining its 2026 IPI growth forecast at 4%, compared with 3.4% in 2025, but sees potential upside following stronger-than-expected industrial activity in the first eight months of the year.
“Robust growth in the first eight months of 2026 and resilient exports, particularly E&E products, suggest potential upside to our forecast,” it said in its latest economic review.
However, MBSB Research expects some moderation in industrial production in the second half of the year due to higher base effects. Supply disruptions, elevated cost pressures, weaker final demand and tighter trade policies could also constrain growth, particularly if geopolitical tensions escalate and global trade uncertainties intensify.
Malaysia’s IPI grew 5% year-on-year (y-o-y) in August, accelerating from 4.7% in July, driven by stronger manufacturing output and electricity generation. This followed two consecutive months of moderation.
Manufacturing production rose 7.4% y-o-y in August, compared with 6.4% in July, while electricity output expanded 9%, up from 5.5% previously.
For the first eight months of 2026, the IPI expanded 5.6% y-o-y, more than double the 2.6% growth recorded in the corresponding period last year. Manufacturing production grew 6.6%, while electricity output increased 6.5% and mining output edged up 0.8%.
MBSB Research said industrial activity should remain supported by external and domestic demand, although the outlook will depend on how global trade conditions and cost pressures evolve.