KUCHING, Nov 9 — Sarawak’s economy is expected to contract between 3.5 per cent and 5 per cent, Chief Minister Datuk Patinggi Abang Johari Openg said today, with negative growth expected across all sectors, with the worst hit being the tourism and manufacturing sectors.
He said the decline in tourism has spilled over to other service sectors, particularly affecting the transport and logistics, hotel and accommodations, wholesale and retail trade, and food and beverages industries.
“For the first nine months of 2020, visitors’ arrivals contracted by 64.1 per cent due to travel restrictions and the closure of international borders.
“The services sector is expected to register negative growth of 1.4 per cent in 2020. We anticipate that the tourism industry will take some time to fully recover,” Abang Johari, who is also the state minister of finance and economic planning, said in his state Budget 2021 speech.
He added the manufacturing sector is projected to contract by 6.9 per cent in 2020 as production activities were disrupted across the global supply chain and firms could only operate at a limited capacity during the first three months of the movement control order (MCO) period.
He said in the mining sector, growth is projected to contract by 2.9 per cent in 2020 attributed to the lower production of crude oil and natural gas.
“The sharp decline was due to the MCO as well as the ongoing maintenance works and the disruption of Sabah-Sarawak Gas Pipeline, particularly in the first half of 2020,” he said.
He said activity in the construction sector was also disrupted as almost all activities came to a standstill during the MCO lockdown.
“Many firms and contractors struggled to comply with the strict Covid-19 standard operating procedures while also suffering a shortage of construction materials and workers due to supply disruptions and cross-border restrictions.
“The construction sector, therefore, is projected to register negative growth of 9.5 per cent in 2020,” he said, adding that the situation, however, is expected to gradually improve, and for 2021, this sector is anticipated to register stronger growth.
The chief minister also said due to lockdowns imposed by countries across the globe, particularly in the first half of 2020, the agriculture sector is projected to contract by 1.5 per cent this year.
“For the first five months, the production of palm oil contracted by negative 2.1 per cent before it gradually picked up starting June 2020.
“With the easing of the Covid-19 lockdowns, the palm oil industry gradually recovered after entering the second half of 2020, supported by improved global consumption.
“The 100 per cent exemption from export duties on crude palm oil, crude palm kernel oil and processed palm kernel oil starting July 1 to December 31, 2020, under the Penjana initiative, further added to the increasing demand, notably from China and India,” he said.
On the demand side, he said trade had slowed since the last quarter of 2019, adding that the situation was made worse by the pandemic.
“For the first eight months of 2020, total trade contracted by 20.9 per cent, with both exports and imports experiencing a double-digit contraction of 24.8 per cent and 12.1 per cent, respectively,” he said.
The chief minister said private investment is expected to contract by 11.3 per cent in 2020 as a lot of groundwork has been put on hold.
Abang Johari said the growth in public investment is also projected to drop significantly in 2020 due to a slowdown in economic activities affected by movement restrictions and Covid-19 mitigation measures.