Malaysia: Economy to be stronger next year

Published: 2009/10/23

THE Malaysian economy is poised to strengthen between two and three per cent next year from a slower contraction of -3 per cent this year, according to the Ministry of Finance today.

This is due largely to pragmatic measures undertaken by the government, including a timely RM67 million fiscal stimulus package, which helped revive the economy despite sluggish global conditions.

Other factors benefiting growth next year includes the stabilising global economic conditions and accomodative monetary policies, the Treasury said in its 2009/2010 Economic Report.

The expected growth this year itself has been revised from an earlier gloomy projection of -4.0 to -5.0 per cent, painting a picture of an economy already on the rebound from the aftermath of the current financial crisis.



It said domestic demand would be the main driver of the economy this year, attributed to public sector expenditure and private consumption.

While public investment is expected to expand, following the implementation of projects under the stimulus packages, private investment is expected to contract, reflecting lower business sentiment.

However, the ministry said private consumption is envisaged to record positive growth on account of firm household disposable income, as a result of a stable job market and recovery in commodity prices.

On the supply side, the Treasury said growth is expected to come from the services and construction sectors.

The ministry said growth in the services sector is anticipated to expand 3.6 per cent in 2010, from an estimated growth of 2.1 per cent this year, emanating from favourable performances in the communication, finance and insurance, wholesale and retail trade as well as real estate and business services sub-sectors.

Recovery in trade-related activity is expected to further enhance growth in the transport and storage as well as utilities sub-sectors.

" Prospects for the services sector is expected to remain favourable, as the government continues to intensify its efforts in developing the sector as the key driver of growth," it said.

Meanwhile, the manufacturing sector is forecast to rebound 1.7 per cent next year from an estimated -12.1 per cent this year.
The recovery will be led by export-oriented industries which are expected to benefit from the global recovery while domestic-oriented industries is expected to expand in line with better consumer sentiment and business confidence.

The ministry said the electronic and electrical industry is anticipated to turn around, driven by higher demand for electronic equipment and parts, as well as semiconductors.

The Treasury added that the resource-based industry is envisaged to grow steadily, following improved demand for etroleum, chemicals, rubber and plastic products.

" With better job prospects and higher disposable income, the transportation equipment sub-sector, in particular the passenger cars segment, is expected to rebound.

" In addition, increasing construction acitivites with the recovery in the housing sector will augur well for the iron, steel and cement segments," it said.

As for agriculture, the ministry said the sector is anticipated to rebound 2.5 per cent in 2010 from an estimated -2.3 per cent in 2009 aided by the recovery in the commodity sub-sector.

It added that the production of crude palm oil is envisaged to increase 4.9 per cent to 17.8 million tonnes next year, from an expected -4.1 per cent growth this year and output of only 17 million tonnes.

The better production is due to matured areas, under oil palm cultivation, increasing to 3.98 million hectares from an estimated 3.80 million hectares this year.

With oil palm trees recovering from biological tree-stress, yield from fresh fruit bunches is poised to increase to 20.9 tonnes per hectare this year while rubber output is projected to increase due to better demand and prices.

The non-commodity sub-sector, mainly livestock and other agriculture, is projected to expand further as implementation of various high impact projects gather pace.

The fishing industry is projected to expand further with increasing number of aquaculture industrial zones.

The ministry also said that the mining sector is expected to turn around 1.1 per cent next year from an estimated -2.9 per cent this year, on account of higher production of crude oil and natural gas.

Production of crude oil is projected to increase 0.8 per cent to 668,000 barrels per day in 2010 due to higher demand, as several oil fields are expected to start production then.

Meanwhile, production of natural gas is expected to increase 2.0 per cent to 2.126 million standard cubic feet due to higher demand from domestic and external markets, and the expansion of MLNG DUA is expected to increase the overall production capacity of gas in Bintulu to 23.9 million tonnes a year.

As for the construction sector, the Treasury expects it to expand 3.2 per cent next year from an estimated 3.5 per cent this year, with all sub-sectors registering steady growth.

The sector is expected to benefit from the economic recovery and ongoing construction activities under the second stimulus package and the exploration activities by oil and gas industries is expected to spur the construction sector.

It said major projects like the Light Rail Transit (LRT) extension works on the Kelana Jaya and Ampang lines, Pahang-Selangor Raw Water Transfer, the new Low Cost Carrier Terminal at the Kuala Lumpur International Airport and expansion of the Penang International Airport, is expected to drive growth of civil-engineering sub-sector.

The non-residential sub-sector is expected to pick up strongly spurred by better demand for property and commercial buildings while the residential sub-sector is also projected to strengthen following improved consumer sentiment and job prospects. - Bernama