MALAYSIA’S manufacturing sector recorded its weakest showing in December, with the key manufacturing index plunging to its lowest level in more than six years because of a drop in demand, according to the Asian Nikkei Review.

The Nikkei Malaysia manufacturing purchasing managers’ index (PMI), which is an indicator of economic health of the sector, plunged to 46.8 from November’s 48.2, according to a survey compiled by IHS Markit.

Readings above 50 indicate an expansion while those below 50 indicate a contraction.

The manufacturing sector contracted in each month of the fourth quarter, after registering a slight increase in September.

“With production falling, firms cut back stocks of inputs and finished goods, suggesting that prospects for the start of 2019 are likely to remain negative,” Joe Hayes, an economist at IHS Markit, was quoted as saying by the report.

The survey earlier reported that introduction of the sales and service tax in September led to weaker demand in the industry.

Malaysia had zero-rated its goods and services tax (GST) in June, before transitioning to the new SST regime.

Cost has also increased due to the depreciation of the ringgit and higher raw material costs.

Finance Minister Lim Guan Eng said yesterday it would take Malaysia three years to restore its fiscal health and to regain its position as “the most promising emerging economy” to achieve high-income status.

Bloomberg had placed Malaysia above the top 20 emerging economies while all three international credit rating agencies maintained its ratings despite the “financial mess” left behind by the previous government.

Lim was referring to the 1Malaysia Development Bhd scandal and Putrajaya’s attempts to pursue the return of stolen funds and prosecuting those responsible for it. – January 2, 2019.