Services sector to be the fastest-growing sector of the economy

Services sector: A Penang private hospital staff attending to a patient. The services sector is projected to grow by 5.9 next year.

THE services sector, which accounts for 55% of GDP, is projected to grow by 5.9% next year from 6.3% this year, which will make it the fastest-growing sector of the economy.

The expansion of services next year takes into account an expansion of all subsectors of the sector, which has diversified over the years. Wholesale and retail trade is estimated to grow by 6.3% next year from 7% this year, a gain that was helped especially with the tax holiday after the Goods and Services Tax was zero-rated for three months in 2018.

E-commerce activities will also lift the segment which has seen 3,800 SMEs join the Digital Free Trade Zone as of September this year.

The finance and insurance subsector is forecast to grow by 5.3% next year, underpinned by sustained bank lending brought about by steady economic activity. That subsegment is estimated to grow by 5.5% this year.

Manufacturing, which is the second largest contributor to GDP with 23%, is expected to grow by 4.7% in 2019 after expanding by 4.9% this year.

Growth in that segment will be backed by export-oriented industries with the expansion undertaken by electrical and electronic companies as well as well as chemicals and chemical products.

E&E output will be driven by wearable gadgets and smart home applications where the Industrial Revolution 4.0 will have an impact on the rising usages of technology in everyday life.

The agriculture sector, dominated by oil palm, is slated to grow by 3.1% next year from a contraction of 0.2% this year. That segment accounts for 7.8% of GDP and the higher price of palm oil at RM2,400 per tonne and higher output of oil palm from 5.5 million ha of matured plantation land is projected to drive growth.

Mining with its 8% share of GDP, is forecast to grow by 0.7% in 2019 after contracting by 0.6% this year.

Supply disruptions in natural gas production will lead to a decline in output this year and for 2019, the recovery of production is expected to boost output next year. Stronger demand from the domestic petrochemical industry and new contracts, such as that from Japan for electricity generation, is expected to support growth in the sector next year.

Construction activities, with their 4.5% share of GDP, are forecast to grow by 4.7% next year from a 4.5% expansion this year. Growth next year will be driven by affordable housing and industrial projects but the review of several infrastructure projects and subdued activity in the non-residential segment will weigh down the sector’s performance next year.