Malaysia Budget 2010 Update: Services to expand 3.6% in 2010

KUALA LUMPUR: The services sector, which accounts for more than half of the country's economy, is expected to grow 3.6% in 2010 from 2.1% in 2009, underpinned by a favourable performance in several sectors.

The report says the sectors that will see favourable performances are communications, finance and insurance, wholesale and retail trade as well as real estate and the business-services sub-sector.

"Prospects for the services sector are expected to remain favourable as the government continues to intensify its efforts in developing the sector as the key sector of growth," Budget 2010's Economic Report states.

The services sector is expected to account for 58.5% of GDP in 2010 compared with 57.9% in 2009.

The report is also optimistic about the manufacturing sector, forecasting a rebound by 7.1% from a contraction of 12.1% this year.

Export-oriented industries are expected to benefit from the recovery in global trade, while domestic industries expand in line with better consumer sentiment and business confidence.

The electrical and electronics industry is expected to turn around, driven by higher demand for electronic equipment and parts as well as semiconductors.

The report anticipates 2.5% growth in the agriculture sector from a contraction of 2.3% in 2009, following a recovery in the commodity sub-sectors.

Production of crude palm oil is envisaged to grow 4.9% to 17.8 million tonnes (2009: -4.1% to 17 million tonnes) as mature areas expand to four million hectares from 3.8 million hectares in 2009.

The mining sector is expected to turn around also to show 1.1% growth from a contraction of 2.9% this year.

The economic recovery and on-going CONSTRUCTION [] activities under the second stimulus package will enable the construction sector to expand 3.2% in 2010, a slight dip from the 3.5% this year.

Major projects include the light rail transit extension works on the Kelana Jaya and Ampang lines, Pahang-Selangor Water Transfer project, new low-cost carrier terminal at the Kuala Lumpur International Airport and the expansion of the Penang International Airport.

Another major project that will drive the growth of the civil-engineering sub-sector is the electrified double-track railway line between Ipoh and Padang Besar.

Written by Joseph Chin