MALAYSIA’S economy in 2016 is expected to be driven by domestic demand with private expenditure as the main anchor while the government expects public expenditure to increase moderately.
Supporting the growth of between 4% and 5% will be the strong economic fundamentals. Inflation is expected to be benign at 2% to 3%, stable employment and an accommodative monetary policy.
On the supply side, all sectors are expected to continue grow but at a slower pace for some, with the main engines of services and manufacturing taking the lead.
The Goods and Services Tax (GST) implemented in April 2015, could see the impact wane but the weakening ringgit vis a vis the major currencies including the US dollar, “may lead to higher prices for some imported goods”.
Sectoral prospects – Supply side
For the supply side, growth is expected to be broad-based. For instance the services sector’swill be underpinned by the resilient private consumption and higher tourism activity.
Manufacturing is expected to see moderate growth ahead of slower growth in China.
The implementation of infrastructure projects would give the construction sector a boost, aided by the sustained construction activity in the property sector.
As for the agriculture sector, this will be supported by the oil palm industry and rubber and also food consumption.
The mining sector will be underpinned by higher crude oil and natural gas production.
The services sector is expected to grow at a slower pace of 5.4% in 2016 from 5.7% in 2015 but it will expand its share of the GDP at 54% from 53.8%.
Slightly slower growth is seen in the wholesale and retail trade at 6.5% in 2016 from 7.6% while food, beverage and accommodation sub-sectors will see growth of 6% in 2016 from 6.2%.
The real estate and business services subsector is expected to grow slightly slower at 5% from 5.4% -- underpinned by expansion in the port and rail services and improved bus services.
Valued-added of the manufacturing sector is expected to grow at a slightly slower clip of 4.3% from 4.5%. Export-oriented industries are expected to benefit from higher demand from advanced economies.
The electrical and electronics industry is expected to driven by higher demand for consumer electronics and well as mechanical and engineering.
As for agriculture sector, growth will continue at the same pace of 1.3% supported by the plantation sub-sector and stronger growth in the food commodity sub-sector.
It said the mining sector to expand at a faster pace of 4% from 3.5% supported by higher output of natural gas and crude oil.
The government anticipates natural gas production to rise5.1% to 6,750 mmscfd particularly when the floating LNG project in Sarawak starts and it is expected to produce 1.2 million tonnes of natural gas a year.
Crude oil production including condensates is expected to rise 1,6% to 640,00 bpd in 2016.
“Crude oil prices are expected to remain subdued at about US$48 per barrel amid the oversupply situation,” it said.
Infrastructure projects are expected to drive the construction sector which is projected to grow at a slower pace of 8.4% from 8.8%. Underpinning the growth will be the civil engineering activities swuch as the Pan-Borneo Highway, Mass Rapid Transit Line 2 and the Pengerang Integrated Complex project.
Domestic demand
Domestic demand is also expected to grow but again at a slower pace of 5.5% in 2016 from 5.9% -- with the private sector driving the expansion.
“The strong private sector performance, despite global uncertainties, will enable the government to continue strengthening its fiscal position while reinforcing the private sector as the engine of growth,” it said.
The Government Transformation Programme and the Economic Transformation Programme’s initiatives and the rollout of the programmes under the 11th Malaysia Plan will underpin the growth.
Private investment will continue to expand but again at a slower pace of 6.7% from 7.3% of which most of the investments would be in the manufacturing and services sectors.
Private consumption is forecast to grow at 6.4% from 6.8%, supported by stable employment prospects and favourable wage growth. This will also be supported by easy access to credit, BR1M cash ttrasfer, accommodative interest rates and benign inflation.
As for public sector – the government will continue to ensure fiscal consolidation. This will see a slight dip in public expenditure to 2.7% from 2.8%. However, new projects under the ETP, 11th Malaysia Plan and on-going projects under the 10th Malaysia Plan will see public investment growing at a slightly faster pace of 2.3% from 1.6%.
“Meanwhile, capital spending by public corporations, particularly Petronas, Tenaga Nasional and Mass Rapid Transit is expected to remain strong,” it said.
Public consumption is expected to increase by 3% -- slightly slower from the 3.6% this year – due to continued allocation for emoluments as well as supplies and services.
Supporting the growth of between 4% and 5% will be the strong economic fundamentals. Inflation is expected to be benign at 2% to 3%, stable employment and an accommodative monetary policy.
On the supply side, all sectors are expected to continue grow but at a slower pace for some, with the main engines of services and manufacturing taking the lead.
The Goods and Services Tax (GST) implemented in April 2015, could see the impact wane but the weakening ringgit vis a vis the major currencies including the US dollar, “may lead to higher prices for some imported goods”.
However, the government envisages the slump in commodity prices and lower global inflation would have a mitigating impact.
Sectoral prospects – Supply side
For the supply side, growth is expected to be broad-based. For instance the services sector’swill be underpinned by the resilient private consumption and higher tourism activity.
Manufacturing is expected to see moderate growth ahead of slower growth in China.
The implementation of infrastructure projects would give the construction sector a boost, aided by the sustained construction activity in the property sector.
As for the agriculture sector, this will be supported by the oil palm industry and rubber and also food consumption.
The mining sector will be underpinned by higher crude oil and natural gas production.
The services sector is expected to grow at a slower pace of 5.4% in 2016 from 5.7% in 2015 but it will expand its share of the GDP at 54% from 53.8%.
Slightly slower growth is seen in the wholesale and retail trade at 6.5% in 2016 from 7.6% while food, beverage and accommodation sub-sectors will see growth of 6% in 2016 from 6.2%.
The real estate and business services subsector is expected to grow slightly slower at 5% from 5.4% -- underpinned by expansion in the port and rail services and improved bus services.
Valued-added of the manufacturing sector is expected to grow at a slightly slower clip of 4.3% from 4.5%. Export-oriented industries are expected to benefit from higher demand from advanced economies.
The electrical and electronics industry is expected to driven by higher demand for consumer electronics and well as mechanical and engineering.
As for agriculture sector, growth will continue at the same pace of 1.3% supported by the plantation sub-sector and stronger growth in the food commodity sub-sector.
It said the mining sector to expand at a faster pace of 4% from 3.5% supported by higher output of natural gas and crude oil.
The government anticipates natural gas production to rise5.1% to 6,750 mmscfd particularly when the floating LNG project in Sarawak starts and it is expected to produce 1.2 million tonnes of natural gas a year.
Crude oil production including condensates is expected to rise 1,6% to 640,00 bpd in 2016.
“Crude oil prices are expected to remain subdued at about US$48 per barrel amid the oversupply situation,” it said.
Infrastructure projects are expected to drive the construction sector which is projected to grow at a slower pace of 8.4% from 8.8%. Underpinning the growth will be the civil engineering activities swuch as the Pan-Borneo Highway, Mass Rapid Transit Line 2 and the Pengerang Integrated Complex project.
Domestic demand
Domestic demand is also expected to grow but again at a slower pace of 5.5% in 2016 from 5.9% -- with the private sector driving the expansion.
“The strong private sector performance, despite global uncertainties, will enable the government to continue strengthening its fiscal position while reinforcing the private sector as the engine of growth,” it said.
The Government Transformation Programme and the Economic Transformation Programme’s initiatives and the rollout of the programmes under the 11th Malaysia Plan will underpin the growth.
Private investment will continue to expand but again at a slower pace of 6.7% from 7.3% of which most of the investments would be in the manufacturing and services sectors.
Private consumption is forecast to grow at 6.4% from 6.8%, supported by stable employment prospects and favourable wage growth. This will also be supported by easy access to credit, BR1M cash ttrasfer, accommodative interest rates and benign inflation.
As for public sector – the government will continue to ensure fiscal consolidation. This will see a slight dip in public expenditure to 2.7% from 2.8%. However, new projects under the ETP, 11th Malaysia Plan and on-going projects under the 10th Malaysia Plan will see public investment growing at a slightly faster pace of 2.3% from 1.6%.
“Meanwhile, capital spending by public corporations, particularly Petronas, Tenaga Nasional and Mass Rapid Transit is expected to remain strong,” it said.
Public consumption is expected to increase by 3% -- slightly slower from the 3.6% this year – due to continued allocation for emoluments as well as supplies and services.
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