KUALA LUMPUR, Oct 29 –The services sector is expected to expand by 7% in 2022, mainly driven by wholesale and retail trade, information and communications, finance and insurance, transportation and storage as well as food and beverages and accommodation sectors.
The Finance Ministry (MoF), in its Economic Outlook 2022 report, said that the sector was badly affected in 2020 with a contraction of 5.5% but rose by 4.8% in the first half of 2021 (1H2021) with less strict standard operating procedures implemented by the government compared to the Movement Control Order 1.0.
The sector is estimated to grow by 0.7% in the second half of this year supported by the gradual opening of the economy, it said in the report released today.
The ministry said the tourism industry is projected to rebound strongly by 28.9% in 2022 with the resurgence of tourist arrivals and domestic tourism although the industry is estimated to contract further by 19.5% in 2021.
Meanwhile, it said the wholesale and retail trade subsector is anticipated to increase by 8.7% next year in line with the wider usage of e-commerce and rapid transition to digitalisation while for 1H2021 it rose by 9.9% supported by strong performance in all segments.
The Distributive Trade Master Plan 2021-2025 would provide a clear direction for the distributive trade sector and outline strategies to support and strengthen the recovery and development of the subsector, it said.
On the finance and insurance subsector, MoF said it projected the subsector to grow by 5.5%, mainly backed by the finance segment, following the continued economic recovery and resumption of investment activities.
It said the subsector recorded a surge of 16.9% in 1H2021 supported by higher loan disbursements, particularly households amid the lower interest rate environment and tax exemption measures and expected to record strong growth of 8.9% for the whole year.
The ministry said with broader internet usage due to the continued surge in e-commerce, e-learning and online entertainment activities, the information and communication subsector is projected to expand by 5.7% next year.
Implementation of infrastructure projects under the National Digital Network will also facilitate the transition to the fifth-generation cellular network spectrum, hence, enhancing network speed and internet coverage, it said,
It said the sector expanded by 6.1% in 1H 2021 and is anticipated to rise by 5.8% for the year.
The ministry said the real estate and business services subsector is projected to rebound by 8.6% next year after being weighed down by 10.5% in 1H2021 and is expected to decline by 5.1% for the whole of 2021 due to slower properties leasing and renting as well as lower demand for professional services.
It said the transportation and storage subsector is anticipated to further expand by 9.5% next year supported by all segments due to the normalisation of economic activities and improved external demand.
The land transport segment is projected to expand, following the increase in cargo delivery and daily ridership of rail transport as well as higher volume of highway traffics, it said. In 2021, it said the subsector is forecast to improve by 2.3% and grew by 3.4% in 1H2021 due to a significant increase in all segments, especially other supporting services following the surge in online shopping.
On food and beverages and accommodation subsector, the ministry said the subsector is projected to turn around by 7.3% attributed to the resumption of travel and tourism activities by phases after being reduced significantly by 15.3 per cent in 1H2021.
On the utility subsector, the ministry projected it to expand by 6.7% in 2022, driven by higher demand from commercial and industrial segments and expected to expand by 5.1% by 2021 following higher electricity usage by industrial, commercial and residential segments.
The other services subsector is projected to turn around by 6.1%t supported by private health and education segments.
Meanwhile, the government services subsector is forecast to grow by 5.3% in 2022 and grow at 5.1% for the whole year of 2021, it added.