KUALA LUMPUR, Nov 6  -- The services sector is projected to rebound by seven per cent in 2021 after contracting by 3.7 per cent this year due to worldwide travel bans, domestic movement restrictions and quarantines, which severely affected the tourism-related subsectors and airlines.

The Finance Ministry said in its Economic Outlook 2021 report that the sector grew by 6.1 per cent in 2019; however, it contracted by 6.7 per cent in the first half of 2020 and is expected to record a smaller decline of one per cent in the second half of the year.

The ministry said the wholesale and retail trade subsector, which is expected to shrink by 6.1 per cent this year, is forecast to rebound by 8.5 per cent in 2021.

Meanwhile, the information and communication subsector is expected to accelerate by 6.4 per cent in 2020 as work-from-home activities, virtual communication and online businesses become the new normal.

“In 2021, the subsector is projected to expand by 7.9 per cent, with the fifth-generation cellular network (5G) spectrum facilitating e-commerce and e-learning activities,” it said. 

The ministry said the formation of the Malaysian Digital Economy Task Force, which focuses on digital technology, cybersecurity, trade and digital content, would support the acceleration of the subsector.

Meanwhile, the finance and insurance subsector is expected to contract marginally by 0.1 per cent this year with the expansion in the insurance segment, reflecting the net impact of higher premiums amid lower claims. 

However, it is projected to rebound by 5.5 per cent in 2021, driven mainly by the finance segment, benefitting from the normalisation of loan repayments and continuation of bank lending amid stronger domestic economic activities.

On real estate and business services, the ministry expected it to continue declining by 11.9 per cent in the second half of 2020 and 11.6 per cent for the whole year due to deferred construction projects and subdued business activities. 

With the projected economic recovery and the roll-out of delayed infrastructure projects, the subsector is expected to rebound by 7.6 per cent next year. 

The transportation and storage subsector is also projected to rebound by 7.5 per cent in 2021, driven by the land transport segment, following operations of new highways, including the Setiawangsa - Pantai Expressway (SPE), Damansara - Shah Alam Elevated Expressway (DASH) and partial alignment of Pan Borneo Highway.

“The air transport segment is anticipated to recover moderately, due to the increase in domestic passenger traffic and cargo movement while the water transport segment is forecast to improve gradually, as world maritime trade recovers,” the ministry said.

For 2020, however, the subsector is forecast to record a drop of 11.9 per cent, with prolonged border closure for tourism-related activities and extension of the Recovery Movement Control Order (RMCO) until year-end.

As for the food and beverages and accommodation subsector, the ministry expected it to decline by 13.3 per cent for 2020 but expand markedly by 10 .7 per cent in 2021, backed mainly by domestic tourism-related activities with support from several initiatives.

The utilities subsector is expected to expand by 1.7 per cent this year and to further grow by 5.7 per cent in 2021, mainly supported by higher usage by the industrial segment in line with expansion in economic activities as well as the implementation of renewable energy projects and Rural Electricity Supply Programme.

On the “other services” subsector, the ministry projected it to expand by 6.2 per cent in 2021, following aggressive branding and digital marketing for health tourism in targeted countries; however, it is expected to decline by 8.1 per cent in 2020.

“The government services subsector is projected to maintain its expansion by four per cent in 2020 and 3.7 per cent in 2021,” it added. 

-- BERNAMA