KUALA LUMPUR: The services sector is expected to expand by 6.1 per cent this year and 6.2 per cent next year, says the Finance Ministry.
In its 2020 Economic Outlook report, the ministry said the sector’s growth this year, constituting about 58 per cent of gross domestic product (GDP), would be supported primarily by the wholesale and retail trade; finance and insurance; information and communication; and food and beverages and accommodation subsectors.
“The sector is projected to expand 6.2 per cent in 2020 with most subsectors expanding at the same momentum, while trade and manufacturing-related services are expected to improve marginally,” it said.
The ministry said the wholesale and retail trade subsector would remain the key driver of the services sector, whereby it was expected to grow 6.8 per cent this year, following expansion in the retail segment, and 7.0 per cent next year, supported by tourism-related activities and accelerating growth of e-commerce utilising the Electronic World Trade Platform.
It said the finance and insurance subsector was expected to grow 4.8 per cent this year mainly attributed to higher growth in financial intermediation services indirectly measured and fee-based income amid low interest rates.
Next year, it said the finance and insurance subsector was anticipated to expand 5.1 per cent, mainly underpinned by the finance segment, benefiting from an increase in bank lending and higher fee income in line with expansion in economic activities.
“In addition, the setting up of the first virtual bank in the third quarter of 2020 to modernise Malaysia’s banking industry as well as the issuance of virtual banking licence guideline is expected to boost further the growth of the subsector,” it said.
The ministry said the information and communication subsector is expected to grow 6.7 per cent this year, attributed to telecommunications and computer services, while the introduction of the fifth-generation cellular network was anticipated to drive the growth of the subsector to 6.9 per cent next year.
The real estate and business services subsector is expected to grow 7.6 per cent this year driven by demand for professional services, particularly legal, accounting and engineering, with the continuation of the Mass Rapid Transit Line 2 (MRT2) and Light Rail Transit Line 3 (LRT3) projects.
Next year, it said, the subsector was forecast to increase 7.8 per cent supported by higher demand for construction-related services with the continuation of mega projects such as the East Coast Rail Link (ECRL) and Bandar Malaysia.
“Furthermore, the enhancement of the eligibility criteria of the Fund for Affordable Homes in September 2019 to further assist first-time home buyers is expected to support the growth of the subsector,” the ministry said.
It said the transport and storage subsector was expected to increase by 6.5 per cent this year and 6.4 per cent next year, supported by the land transport segment, as well as higher airports and ports services in line with the improvement in trade activities.
On the food and beverages and accommodation subsector, the ministry has projected that it will record a strong growth of 9.2 per cent this year, mainly supported by household and tourist spending, and 8.9 per cent next year due to higher tourist arrivals and receipts amid Visit Malaysia 2020, which targets 30 million tourists and RM100 billion in receipts.
Other factors that are expected to support this subsector include the extended Visa on Arrival from seven to 13 entry-points nationwide for Chinese and Indian tourists, as well as the hosting of Asia-Pacific Economic Cooperation (Apec) meetings from December this year to November next year. - Bernama