Economic Report 2014-15: M’sia to grow 5%-6% in 2015


  • Economy
  • Friday, 10 Oct 2014


KUALA LUMPUR: Malaysia’s economy is expected to expand between 5% and 6% in 2015 as the economic growth momentum continues from 2014, led by the private sector.

The Economic Report 2014-2015 said improving external demand and resilient domestic economic activity would underpin the growth amid concerns about the global economic growth.

“On the supply side, all economic sectors are expected to record positive growth in 2015, with the services and manufacturing sectors remaining the major contributors,” it said.

“Sustained growth in domestic demand, albeit at a moderate pace, is expected to contribute  to the expansion in domestic-related activities,” it said.

For 2015, the services sector is forecast to expand 5.6% (2014: 5.9%) and account for 55.4% share of GDP (vs 55.3%). 

The agriculture sector is forecast to grow at 3.1% in 2015 (3.8%) due to higher output of palm oil.

Mining and quarrying activity is expected to expand 2.8% (0.7%).

Manufacturing is seen to grow slower at 5.5% (6.4%) but this is mitigate by the  electrical and electronics sub-sector due to improving external conditions.

Construction would expand at the similar pace of 10.7%, supported by the civil engineering and residential sub-sectors.

SERVICES SECTOR

For 2015, the wholesale and retail trade as well as accommodation and restaurant sub-sectors are projected to see growth of 7.1% and 5.9% respectively (7.7%; 6.1%).

Buoying the growth will be the strong domestic consumption and higher tourist arrivals following the Malaysia Year of Festivals 2015.

The communications sub-sector is expected to grow 9.6% (10%) while the real estate and business services is seen to grow 7.1% (7.5%) and the transport and storage sub-sector 4.7% (5%).

MANUFACTURING

The valued-added of the manufacturing sector is expected to grow 5.5% (2014: 6.4%).

The electrical and electronics (E&E) sub-sector is expected to see strong growth, due to strong demand for semiconductors, electronic components, communications and computer peripherals.

Higher demand for petroleum, rubber and chemical products will underpin the resource-based industry. The transport equipment sub-sector, especially the car segment, will expand further.

Infrastructure projects including the Mass Rapid Transit (MRT) and extension of the light rail transit will help drive  growth in the construction-related industry.

AGRICULTURE

The agriculture sector should grow 3.1% ( 3.8%) on higher production of crude palm oil. Output of rubber is expected to reach 800,000 tonnes, up from 792,000 tonnes in 2014.

MINING

The mining sector is expected to see faster growth of 2.8% (0.7%) on higher production of crude oil and natural gas and also enhanced oil recovery and additional fields.

CONSTRUCTION

The start of several oil-and-gas related projects will help drive the construction sector’s  growth rate of 10.7% (12.7%) supported by the oil and gas (O&G) related projects such as the Refinery And Petrochemical Integrated Development (RAPID) and ongoing transportation-related infrastructure projects.

Demand for affordable housing will support the industry while the non-residential sub-sector is also expected to remain stable.

DOMESTIC DEMAND

The public sector will remain the main driver of domestic demand. However, after the strong expansion in 2014, the government anticipates growth in private consumption and investment to moderate in 2015.

The implementation of the Goods and Services Tax (GST) is expected to temporarily impact domestic demand.

However, high export earnings and increased wages are expected to have positive effect on private investment and consumption.

Private consumption is expected to grow at 5.6%  (6.5%) below the long-term average. Consumers will remain cautious following the fuel subsidy reduction in October and the implementation of the GST in April 2015.

As for private investment, the government forecasts 10.7% growth (12%) as the private sector remains the engine of growth. Capital expenditure is expected mainly in the services sector, especially private education, transportation and health sub-sectors, and manufacturing sector.

Public consumption should see 3.8% growth (2.1%) due to spending on supplies and services as well as emoluments.

Public investment is expected to jump to 4.7% (2014: 2.6%) as the government speeds up its implementation of projects towards the tail-end of the 10th Malaysia Plan, particularly in the transport, trade and industry sub-sectors.

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