KUALA LUMPUR, Aug 11, (Xinhua): Economists have foreseen trade headwinds to remain a drag on Malaysia's industrial output outlook after the country's industrial production index (IPI) growth moderated to 2.2 percent in the first half. RHB Investment Bank said in its recent note that the renewed global tariffs, especially the proposed 100 percent US semiconductor tariff, posed risks to Malaysia's export-driven sectors.

"Potential slower growth in major economies and persistent tariff tensions, especially following the end of the pause period, pose a significant impact on Malaysia's trade and manufacturing sector outlook, reinforcing our cautious stance," said the research house. Meanwhile, MBSB Research in its recent note maintained its projection that Malaysia's IPI growth will moderate to 2 percent this year, taking into account the possible impact of higher tariffs on external trade.

"Earlier front-loading and growing domestic demand will still keep IPI growth in the positive," said the research house. It continues to expect sustained growth in domestic spending and local business activities will drive production of domestic-oriented goods. On the external front, it expects producers and exporters will closely monitor the risk of slower external demand due to higher import costs and potentially weaker economic growth in major markets.

Kenanga Research opined that fresh uncertainty emerges following the latest US proposal to impose a 100 percent tariff on microchip and pharmaceutical imports. The research house, however, has maintained Malaysia's full-year manufacturing growth at 3.9 percent, anchored by domestic strength. "Domestic-oriented manufacturing is expected to stay resilient, supported by continued public spending and steady domestic demand," it noted.