How does one measure the state of the economy in a country? There are many aspects to look out for, but one that must always be calculated is the gross domestic product (GDP). When GDP grows, the nation’s economy is expected to grow positively. In 2022, Malaysia’s economy recovered and expanded further than anticipated. The GDP reached 8.9%, a few points higher than the previous quarter.
Aside from domestic consumption and the monetary values of final goods and services, GDP also takes the economic activities of that country into account. For example, investment growth and trades. As Malaysia went from primary agriculture to an industrial economy, several industries emerged as the key drivers in 2022. These are the top 5 industries now driving the Malaysian Economy.
Starting with number one on the list, the services sector remains the top commodity in Malaysia’s economy. The services sector accelerated to 12% from the previous 6.5% in Q1 of 2022. Subsequently, it generates 58.1% of the total GDP. Several sub-sectors contribute to the sterling success of the services sector, mainly the transportation & storage subsector (35.8%), food & beverages & accommodation (35.3%), and wholesale & retail trade (17.3%).
With the borders opened up and activities resuming to the pre-COVID era, the services sector is expected to grow even more in the next year. Most specifically, the retail and F&B, and accommodation sub-sectors since more tourists are coming to Malaysia.
Taking the second spot, the manufacturing sector bounced back in 2022. During the pandemic, this sector was highly affected due to the lockdown restrictions (Movement Control Order), which forced companies and factories to shut down momentarily.
However, the manufacturing sector had risen above its adversaries and increased its production to 9.2%. The sector was supported by the transport, equipment, and other manufacturing & repair sub-sector (19.9%), non-metallic mineral products, base metals & fabricated metal products (10.3%), and electrical, electronic & optical products (15.5%).
Now, most, if not all, employees are fully vaccinated and boosted, and the workplace capacity is no longer restricted. This has brought a welcomed change to the manufacturing sector; production can continue as usual and meet the ever-growing market demand.
Mining & Quarrying
Although the mining and quarrying sector experienced a slight decrease in 2021, it improved slightly in Q2 2022 (from -1.1% to -0.5%). The natural gas subsector contributed 0.4% of total production, whereas other mining & quarrying & supporting services dominated with its 5.3% rate. Production of minerals like petroleum, natural gas, copper, iron, and bauxite has decreased over time, although there are still many untapped opportunities for resources.
Similar to the mining & quarrying sector, the agriculture sector dipped to -2.4% from 0.1% in Q1 2022. Climate change might be to blame. A study published in AGRARIS reported that agriculture production in Malaysia has been decreasing in recent decades. Frequent droughts and floods did not help the condition either. However, new policies, technology, and a more approachable financing option can boost the production of this sector.
Last but not least, the construction sector recoiled with a significant increment – from -6.2% to 2.4% over three months. Since the government has committed to continue aggressive infrastructure improvement in Malaysia, it’s not surprising that the construction sector has emerged as one of the most sought-after industries.
The top players in the construction sector were the expansion of non-residential buildings (10.1%), specialized construction activities (7%), and residential buildings (2.7%). This growth is astounding because of the rising costs of raw materials and finished goods. Property prices are also expected to increase exponentially in the upcoming years.
Special Mention: MSMEs
The MSMEs saw a 6% increase in job recruitment in Q2 of 2022 – a 1% improvement compared to the Q1 2022 report. Moreover, MSMEs help the recovery of several sectors, such as services, construction, and mining & quarrying sectors. In 2021 alone, MSMEs contributed 37.4% of the overall GDP. Hence, MSME is one sector worthy of your attention and investment.
Malaysia’s economy will keep growing. Nothing is set in stone – there are infinite possibilities as to where the economy will move towards. With inflation and the economic challenges, experts predict that some key industries will stay, while others may have reached a plateau. Either way, we are eager to see the changes in the coming decade.