Malaysia: Economic Report 2017/18: Services sector to drive growth

• Oct 27, 2017

THE services sector will continue to be the main driver of economic growth in 2018 as its share of the gross domestic product (GDP) is set to expand to 54.8% in 2018 from 54.5% in 2017.

The government expects growth to dip slightly to 5.8% in 2018 from 5.9% in 2017 as all sub-sectors continue to expand at a slower pace.

Wholesale and retail trade, and food & beverages and accommodation are expected to grow at a slower pace of 6.1% and 7.2% respectively. This is slightly slower than the 6.5% and 7.6% in 2017.

Growth will be underpinned by steady domestic consumption and higher tourist arrivals. 

However, the information and communication sub-sector is expected to expand at a faster pace of 8.8% from 8.5% in 2017.

As for the transport and storage sub-sector, the government forecast it to slow down to 5.8% from 6.2% but this will still be firm growth due to high ridership on rail services, particularly the Mass Rapid Transit (MRT), new passenger aircraft services and improved port facilities.

The finance and insurance sub-sector is expected to grow at a stronger pace of 4.4% from 4.2%, supported by strong financing activities.

Manufacturing

The manufacturing sector’s growth is forecast to increase 5.3% from 5.5%. The export-oriented industries are expected to expand due to sustained demand for electrical and electronics (E&E), refined petroleum and wood products.

Domestic-oriented industries are expected to remain resilient due to ongoing construction of infrastructure projects as well as strong demand for consumer products, especially food and transport equipment.

Agriculture

Growth in the agriculture sector is expected to decelerate to 2.4% from 5.6%. Crude oil production is expected to rise by 2.5% to 20.5 million tonnes compared with 20 million tonnes in 2017 when it recorded 15.5% growth.

Palm oil price is expected to be about RM2,750 per tonne, a slight increase from RM2,700 in 2017.

Mining

The mining sector is projected to expand at almost double the pace from 2017 to 0.9% versus 0.5% due to higher production of natural gas. For 2018, Brent is expected to trade at an average US$52 per barrel from US$50 in 2017.

Construction

The ongoing civil engineering infrastructure projects such as the East Coast Rail Link, MRT Sungai Buloh-Sepang-Putrajaya line, electrified double-track Gemas-Johor Bahru, SPE, Pan Borneo Highway and Bokor Central Processing Platform.

Housing will be given a boost with several new planned townships by private developers. The sub-sector will also benefit from the various affordable housing programmes by the government.

However, the non-residential sub-sector is expected to grow at a moderate pace following the property overhang, particularly in the shops segment.

Source: http://www.thestar.com.my/business/business-news/2017/10/27/economic-report-2017-18-services-sector-to-drive-growth/#GDlIQLcUtQkiDUhb.99