The Socio-Economic Research Centre (SERC) is optimistic towards the 5.3% year-on-year (y-o-y) projected growth expected for the local services sector premised on sustained domestic consumption that will support the retailing, restaurants, accommodation and communication segments
SERC executive director Lee Heng Guie noted a revival of the tourism industry will also be a factor supporting this growth, but noted that this is dependent on the strength of that revival.
Spepaking at the CEO Series 2023 (Economy & Business Forum) today (Dec 7), he said: “Pre-Covid-19 pandemic average spending for tourists was RM3,300, and with the ringgit having weakened significantly [over the past year], I think the tourists that come here can spend even more. So, I think this spending effect should be able to support the local services industry.”
Lee added downside risks comprise concerns about business cost pressure, ESG compliance and climate change, the government’s planned subsidy rationalisation, the high-value goods tax, as well as the higher services and sales tax.
Touching on the manufacturing sector, Lee said it will be supported by the electrical and electronic (E&E) segment, which is to be propped up by continued recovery in global electronics demand — which experienced a downturn in 2022 and bottomed out in 2023.
He said dampening factors to the manufacturing sector’s performance will be related to cost pressure, and the weak ringgit’s impact on the import of raw materials, intermediates, as well as machinery and equipment.
Lee was also positive about the construction sector’s performance in 2024, which he projects to grow by 6.8% y–o-y, supported by the government’s ongoing strategic infrastructure spending. He noted that after many years of decline, the sector has shown signs of growth, based on the quarterly momentum.
There seems to be obstacle for the construction sector as for the risk borne by the government in terms of execution and implementation.
“I think most of the big projects are quite on track with their timelines. Hopefully, there will be no cost overrun, and that will continue to support the construction sector,” he added, noting that the ECRL is 55% complete, the Johor-Singapore Rapid Transit System at 42%, and the Pan-Borneo Highway at 82%.”
On the banking sector, Lee said it will continue to grow despite operating in a challenging cost operating environment in 2024, underpinned by a well-capitalised base and strong liquidity buffers.
However, he noted that a key risk to the sector is cost pressures exerted on highly leveraged borrowers, and small and medium enterprises (SMEs) — the latter of which (SMEs) have seen their non-performing loan ratios on the rise since early 2022.
Lee added he is cautiously optimistic on the property sector, noting that while recovery has been there, it is not firm, with consumers purchasing based on needs and not as investments as in the past.
