Revising down its near-term growth forecasts for Malaysia’s power consumption and generation, Fitch Ratings says the subdued economic outlook and weakened industrial production will weigh on power demand and consumption.
Taking the persistent headwinds from a Covid-19 resurgence and containment measures in the market into consideration, it says the power capacity growth will be less impacted because it is supported by several large-scale projects.
However, there are increasing downside risks if project delay goes beyond expectations.
Nevertheless, Fitch now expects power consumption to grow by 1.5%, compared to initial forecasts of 3.5% in 2021, and 4.1% in 2022 (from 6.0% previously) with further downside risks.
“Impacts from the outbreak and extended containment measures will weigh heavily on manufacturing, exports and private consumption, alongside a relatively subdued economic outlook, which will serve to constrict power consumption,” it says.
While the government has opted to allow more industries to operate in spite of the lockdown, renewed containment measures under the Movement Control Order (MCO) have inevitably weighed on both domestic manufacturing and production.
SUPPLY CHAIN DiSRUPTIONS
In addition, global surging prices for raw materials and freight across recent months have also led to some supply chain disruptions and production delays.
Malaysia’s Manufacturing Purchase Managers’ Index has fallen back into contractionary space since June, hitting levels close to the initial outbreak in 2020.
“We note that Malaysia’s industrial consumption, particularly in its large manufacturing sector, accounts for nearly 50% of total power consumption, as such, we expect this to weigh significantly on power consumption over the near term.
Beyond the industrial sectors, a hit on other sectors such as retail and services, will lead to overall weakening private consumption figures, which weighs on power consumption by extension as well.
