The domestic manufacturing sector may endure a bumpy road in the near term due to the expected surging COVID-19 cases brought by the Omicron wave, Kenanga Research said in a note.
It said that it retains a cautious outlook for 2022 aside from the Omicron wave, raw materials, and labour shortages, and China’s zero-COVID strategy could prolong the global supply chain disruptions.
Kenanga said that nonetheless, it believes the impact would be less severe and short-lived, given the current higher vaccinated population and aggressive vaccine booster campaign supported by sizeable fiscal expenditure and various ongoing support.
The research house said that against this backdrop, it retains the 2022 GDP growth forecast at 5.5% – 6.0% (point forecast: 5.7%) while the GDP growth in 2021 is expected to settle within our projection of 3.5% – 4.0% (point forecast: 3.7%).
Manufacturing PMI slid to 50.5 in January (Dec 21: 52.8), a four-month low, in line with the slowing global PMI trend. Kenanga Research said that recovery in the manufacturing conditions was hampered by the sustained raw material shortages and rising prices.
The research house said that both output and new orders moderated, as raw material shortages and rising prices weighed on demand and production capacity.
