THE Malaysian economy is expected to moderate between 5% and 6% this year, consistent with the softening of global demand, particularly from the United States, the European Union, China and Japan, and anticipated slowdown in global demand for electronics.
Since Malaysia is a net exporter of oil, higher oil prices are expected to cushion the decline in global electronics demand.
The Malaysia International Trade and Industry Report 2004 stated that that manufacturing sector would continue to remain the main engine of growth through efforts to manufacture more high value-added products and expansion into new markets.
This sector is expected to register 7.6% growth in 2005, down from last year’s 9.8%, primarily due to the expected decline in the electrical and electronics (E&E) sector.
Growth for this sector is expected to slow down this year due to lower demand from major markets, especially from the US, China and Japan, as a result of inventory built-up last year.
The lower demand for semiconductors will also contribute to the overall moderate performance of the sector.
The demand for iron and steel products for manufacturing activities is projected to grow with the commencement of new facilities in the production of specific grade and specifications, which were previously not produced in the country, as well as sustained external demand through ongoing efforts by local manufacturers in exploring new markets.
However, demand for iron and steel products by the construction and building sector is not expected to improve further in 2005, due to the reduction in the public sector spending to achieve a balanced budget by 2007.
The machinery and equipment sector is anticipated to grow at a moderate rate of 4%. The demand for specialised machinery is expected to grow to cater to specific industries.
Malaysia is expected to produce more high value-added machinery due to the introduction of new technology, automated manufacturing process and installation of sophisticated machinery.
Demand for chemicals and chemical products is also expected to expand due to the growth in the oil and gas industry and pharmaceutical sector.
The projected hike in health expenditure by the public and private sectors will contribute to the sustained growth of the pharmaceutical sub-sector.