Friday 29 Mar 2024
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  • Service sector to be fastest-growing sector of economy in 2020
  • 4.1% growth in manufacturing sector
  • Agriculture sector to grow slower at 3.4%
  • Stronger growth of 3.7% in construction sector in 2020 versus 1.7% in 2019
  • Mining-sector growth to moderate to 0.3%

Service sector to be fastest-growing sector of economy

KUALA LUMPUR: The service sector is projected to grow 6.2% year-on-year (y-o-y) in 2020, from 6.1% this year, making it the fastest-growing sector of the economy. 

The growth in 2020 will be underpinned by an expansion in most sub-sectors.

The wholesale and retail trade sub-sector is expected to grow at 6.8% and 7% in 2019 and 2020 respectively. The ministry of finance (MoF) said growth in 2020 will be supported by tourism-related activities and accelerating growth in e-commerce, while growth in 2019 is due to an increasing number of convenience stores.

The finance and insurance sub-sector is anticipated to grow stronger at 5.1% in 2020, compared with an estimated growth of 4.8% in 2019. The MoF said the higher estimated growth is underpinned by an increase in bank lending and higher fee income in line with an expansion in economic activities.

"In addition, the setting up of the first virtual bank in the third quarter of 2020 to modernise Malaysia's banking industry, as well as the issuance of virtual banking licence guidelines, is expected to boost further the growth of the sub-sector," the MoF said.

The information and communications sub-sector is also projected to accelerate its growth to 6.9% in 2020, against a 6.7% estimated growth in 2019, driven by the introduction of fifth-generation (5G) technology. 

"The 5G technology will create a competitive market for home broadband services as well as increase the coverage and network quality.

"This will strengthen Malaysia's capacity to participate in the IR4.0 (Industrial Revolution 4.0), allowing the industry to fully utilise artificial intelligence, robotics, virtual reality, big data analytics, the Internet of things and software engineering, leading to higher digital adoption.

For the real estate and business service sub-sector, it is expected to grow by 7.8%, up from an estimated growth of 7.6% in 2019, supported by higher demand for construction-related services with the continuation of megaprojects such as the East Coast Rail Link (ECRL) and Bandar Malaysia.

Manufacturing sector to grow marginally higher at 4.1% in 2020

The manufacturing sector is expected to grow marginally higher at 4.1% in 2020, from 4% this year.

The growth will be driven by a steady improvement in export-oriented industries, coupled with a sustained expansion in domestically-oriented industries.

Overall gross exports are expected to expand 1% in 2020, benefitting from an anticipated improvement in global trade activities and an uptick in the electrical and electronics (E&E) cycle.

Accordingly, exports of manufactured goods are projected to increase by 0.9%, with E&E exports expanding by 0.8%.

Meanwhile, growth in exports of non-E&E products is expected to be 1.1%.

Agriculture sector to grow slower at 3.4%

The agriculture sector is expected to grow at a slower pace of 3.4% next year, from an estimated 4.3% growth this year, mainly as growth in the oil palm sub-sector moderates from 7.7% in 2019 to 5.5% in 2020.

Production of the oil palm sub-sector is expected to improve to 22.2 million tonnes in 2020, from 21 million tonnes in 2019. Meanwhile, a higher oil extraction rate of 20.2% is estimated for 2020, compared with 20.1% for 2019, due to fresh fruit bunches of better quality.

The crude palm oil (CPO) price is expected to improve to RM2,100 per tonne next year, compared with an estimated RM2,000 per tonne in 2019. The increase in CPO prices will mainly be due to an increase in domestic consumption of biodiesel and higher demand in major markets amid higher price competitiveness against other vegetable oils.

Moving forward, the government will implement the B20 biodiesel programme, which is currently on a six-month trial and is expected to boost domestic demand for palm oil and contribute to a cleaner environment.

Construction sector to grow 3.7% in 2020, versus 1.7% in 2019

The construction sector is expected to improve in 2020, with a growth rate of 3.7% y-o-y, on account of an acceleration and revival of megaprojects as well as the building of affordable homes, according to the MoF's Economic Report 2019/2020 entitled "Microeconomic Outlook".

The MoF, however, noted that subdued growth in residential and commercial properties is expected to weigh down the sector's performance.

The ministry said the construction sector grew a marginal 0.4% during the first half of 2019, and it expects the sector to achieve an annual growth of 1.7% in 2019, mainly supported by the civil engineering segment, in particular investments in infrastructure-related projects.

The sector's growth will be backed by the infrastructure projects highlighted by the MoF, including the ECRL, the Mass Rapid Transit Line 2, the Light Rail Transit Line 3, the Gemas-Johor Baru electrified double-tracking project, Klang Valley Double-Track Phase 2,the Central Spine Road, the Pan Borneo Highway and the Sarawak coastal highway project.

“Meanwhile, in the petrochemical and power plant segments, new projects such as Pengerang Deepwater Terminals (Phase 3), the Baleh hydroelectric dam and the Sarawak Water Supply Grid Programme (Phase 1) are expected to support the growth of this sub-sector further,” it added.

On the residential sub-sector front, the MoF expects growth at a slower pace, mainly due to an elevated property overhang caused by a mismatch between supply and demand.

Noting the rising property overhang and low incoming supply, the MoF said the non-residential sub-sector will remain subdued next year following a lack of initiatives on new mega commercial projects. 

Mining-sector growth to moderate to 0.3%

The mining sector is slated to grow 0.3%, down from an estimated 0.6% growth in 2019.

The sector's expansion will be backed by stable gas production derived from stronger domestic demand in the petrochemical industry and rising exports of liquefied natural gas, particular to China, Japan and South Korea.

The commencement of the North Malay Basin Full Field Development (FFD — Phase 2) in Penisular Malaysia as well as Gorek, Integrated Bokor (Phase 3) and Betty redevelopment projects in Sarawak are expected to support growth in the sector next year.

Production of crude oil is projected to increase moderately, supported by projects such as Anggerik FFD, Zetung FFD in Penisular Malaysia and the Bayan oilfield (Phase 2B and 2C) in Sarawak.

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