Banking on the services sector
THE services sector remains a significant driver of the Malaysian economy.
Rapid expansion of the digital economy and the launch of Visit Malaysia 2020 (VM2020) are seen to further boost growth of the sector. The services sector is projected to grow 6.1% in 2019, constituting about 58% of gross domestic product (GDP) and to further expand 6.2% in 2020, the Economic Outlook 2019/2020 states.
The sector expanded 6.3% during the first half of this year.
Growth in the services sector will be primarily supported by the wholesale and retail trade; finance and insurance; information and communication; and food & beverage subsectors.
Within this sector, the wholesale and retail trade remains a key contributor and is expected to grow 6.8% in 2019.
This is projected to increase to 7% in 2020, supported by tourism-related activities and accelerating growth of e-commerce.
The anticipated increase in tourist arrival and receipts in lieu of VM2020, which targets 30 million tourists and Rm100bil receipts will also boost the food & beverage and accommodation subsectors.
For 2019, tourists arrivals are estimated to reach 28.1 million, with total receipts of Rm92.9bil.
In 2018, the gross value added of tourism industries grew 10% to Rm220.6bil, accounting for 15.2% of Malaysia’s GDP.
The report projects the segment to record a strong growth of 9.2% this year and to expand by 8.9% in 2020.
As for the finance and insurance subsector, it is expected to grow 4.8% in 2019, backed mainly by the finance segment.
The insurance segment is, meanwhile, projected to grow at a slower pace on account of lower premiums and higher claims.
The setting up of the first virtual bank in the third quarter of 2020 to modernise the country’s banking industry is expected to further boost the subsector.
The government targets to increase the national insurance penetration rate from 54% in 2019 to 75% in 2020 through a greater awareness campaign, particularly to the middle-income group.
In the information and communication subsector, the introduction of the fifth-generation cellular network or 5G is anticipated to drive the growth of this segment to 6.9% in 2020 from a growth of 6.7% expected in 2019.
Meanwhile, the manufacturing sector is expected to perform moderately in subsequent quarters before gaining momentum in the second half of 2020 in line with the anticipated upturn in the global electronics demand.
Manufactures in Malaysia are expected to benefit from the changes in the global electronics supply chain following the Us-china trade dispute.
Higher production of crude palm oil and natural gas will support the growth of the commodities sector, while the construction sector is projected to improve with activities in the civil engineering segment cushioning the subdued performance of the residential and
commercial property segments.
The construction sector recorded a marginal increase of 0.4% during the first half of 2019 and projected to expand 1.7% for the whole year.
The acceleration and revival of mega projects, as well as the building of affordable homes, will see the sector growing further to 3.7% in 2020, according to the economic outlook.