Malaysia's IPI increases by 2.1% in January 2025

[MALAYSIA] Malaysia’s Industrial Production Index (IPI) increased by 2.1% year-on-year in January 2025, signaling a positive start to the year despite ongoing challenges in some sectors. The growth, which was primarily driven by the manufacturing sector, offers an optimistic outlook for Malaysia’s economic recovery and growth prospects. In particular, the performance of the manufacturing sector has been instrumental in driving the increase in IPI, with some areas like food, beverages, tobacco, and electrical and electronics products making notable contributions to the overall expansion.

Before delving into the details of Malaysia’s IPI growth, it’s important to understand what the Industrial Production Index measures. The IPI is a key indicator used to gauge the health of a country’s industrial sector. It tracks the output of various industries, including manufacturing, mining, and electricity generation. A rise in the IPI generally signals economic growth and indicates that industrial activity is on the uptrend, while a decline could suggest economic slowdown or contraction.

Malaysia’s IPI Growth in January 2025

The most recent data from the Department of Statistics Malaysia shows a 2.1% year-on-year increase in IPI in January 2025. This positive growth figure is a welcome sign, as it indicates a stable recovery for the country’s industrial sector after a tumultuous couple of years. The IPI’s growth was largely attributed to the manufacturing sector, which demonstrated strong performance despite a slight slowdown compared to previous months.

According to Datuk Seri Dr. Mohd Uzir Mahidin, the Chief Statistician of Malaysia, the IPI’s growth was “mainly contributed by output growth in the manufacturing sector.” He added that while the growth was somewhat moderate compared to the previous month, the manufacturing sector continued to show resilience. This was particularly evident in certain subsectors, such as food, beverages, and tobacco, which registered impressive growth rates.

The Role of the Manufacturing Sector in IPI Growth

The manufacturing sector has been a key driver behind the overall IPI growth in Malaysia. In January 2025, the manufacturing sector expanded by 3.7% year-on-year. While this growth rate was slower than the 5.8% growth recorded in December 2024, it remains a critical pillar of Malaysia's industrial output. The sector's positive performance is a testament to the strength of Malaysia’s diversified manufacturing base, which spans a wide range of industries.

Some of the most notable subsectors contributing to this growth include the food, beverages, and tobacco industries, which saw a robust 10.6% increase in output. The electrical and electronics products industry also performed well, supporting the country’s standing as a key player in the global electronics supply chain.

“Food, beverages, and tobacco products showed significant growth of 10.6%, continuing to outperform other sectors,” said Dr. Uzir in his commentary. This growth is particularly important as the global demand for processed and packaged foods has surged, driven by both domestic consumption and exports.

Additionally, Malaysia’s non-metallic mineral products, basic metals, and fabricated metal products industries also posted positive growth, with the latter contributing to the overall resilience of the manufacturing sector. These industries are vital to Malaysia’s manufacturing ecosystem and play an important role in the production of essential goods and materials used across various other sectors.

Challenges in the Mining and Electricity Sectors

While the manufacturing sector enjoyed positive growth, the mining and electricity sectors faced difficulties. The mining sector saw a contraction of 3.1% in January 2025, primarily driven by a decline in crude petroleum and condensate output, which fell by 10%. However, there was a modest 1.4% growth in natural gas production, which helped offset some of the losses in the petroleum sector.

In terms of the electricity sector, Malaysia experienced a slight decline of 0.1% in January 2025. This marks a contrast to the 3.5% increase recorded in December 2024. Dr. Uzir noted that this slight contraction in the electricity sector contributed to the overall modest performance of industrial production in the month of January.

The challenges faced by the mining and electricity sectors are not surprising, given the fluctuating global commodity prices and the ongoing energy transition. Malaysia’s heavy reliance on oil and gas exports for economic growth means that any disruptions in global energy markets can have an immediate impact on the country’s industrial performance.

Month-on-Month Comparison: January vs. December 2024

When looking at the IPI on a month-to-month basis, January 2025 showed no significant improvement compared to December 2024, with the IPI declining by 0.4%. This reflects the continued challenges faced by specific sectors within the industrial production landscape. While January 2025’s year-on-year growth of 2.1% is encouraging, the month-to-month comparison highlights the need for sustained efforts to maintain momentum in Malaysia’s industrial performance.

"However, while January 2025’s IPI contracted by 0.4% from December, the year-on-year growth remains a testament to the resilience of the manufacturing sector,” noted Dr. Uzir. This suggests that while there are short-term challenges, Malaysia's industrial base remains fundamentally strong, and the long-term outlook for the sector remains positive.

Manufacturing Sales Value and Its Economic Impact

In addition to the IPI, another positive indicator of Malaysia’s industrial performance is the sales value of the manufacturing sector. In January 2025, the sales value of manufacturing output increased by 3.5%, totaling RM158.1 billion. This increase in sales value indicates that while the production of certain goods may have slowed in some sectors, the demand for manufactured goods, especially in key subsectors like food, electronics, and basic metals, is still strong.

“The sales value in manufacturing continues to show positive growth,” Dr. Uzir observed. This growth is significant as it underscores the ongoing competitiveness of Malaysia's manufacturing sector, despite the challenges faced by other industries like mining and electricity.

Malaysia’s Economic Recovery and Future Outlook

The growth of the IPI in January 2025 is a positive sign for Malaysia’s overall economic recovery. With the global economy showing signs of stabilization, Malaysia’s industrial output is expected to continue its gradual recovery in the coming months. Experts are cautiously optimistic that the manufacturing sector, in particular, will maintain its upward trajectory, supported by both domestic demand and exports.

Additionally, Malaysia’s ongoing efforts to diversify its industrial base and invest in higher value-added manufacturing industries, such as electronics, pharmaceuticals, and renewable energy, are likely to strengthen the country’s industrial output in the long term. As a key player in Southeast Asia, Malaysia’s ability to adapt and innovate in its industrial sector will be critical to maintaining its competitiveness on the global stage.

While challenges remain, especially in the mining and electricity sectors, the overall performance of the IPI in January 2025 points to a resilient and growing industrial base in Malaysia. The government's focus on industrial development and economic diversification bodes well for Malaysia's continued growth and prosperity.

Malaysia’s 2.1% year-on-year increase in IPI in January 2025 is a promising sign that the country’s industrial sector is on the right track. The growth in the manufacturing sector, especially in food, beverages, tobacco, and electronics, shows the country’s resilience and ongoing competitiveness in global markets.

Despite some setbacks in the mining and electricity sectors, Malaysia’s overall industrial performance remains strong, thanks to the solid performance of key subsectors. As Malaysia continues its recovery and adapts to changing global trends, the outlook for the country’s industrial production remains positive.

Looking ahead, Malaysia’s ability to navigate challenges in energy markets and continue its focus on innovation and sectoral growth will play a crucial role in ensuring long-term economic success. As Dr. Uzir concluded, “The growth of the IPI reflects the overall stability of the industrial sector, and Malaysia is well-positioned for future growth.”

With a solid start to 2025, Malaysia’s industrial sector is poised for a year of growth and resilience, providing a positive foundation for the country’s economic future.