GEORGE TOWN, Nov 26 — Penang’s Gross Domestic Product (GDP) contracted by 2.1 per cent in 2020, mostly due to contraction in the services sector, said Penang Chief Minister Chow Kon Yeow when delivering his Penang Budget speech today.
Chow told the state legislative assembly that the services sector, which included the retail, hotel, food and beverage, transportation, storage and property subsectors, in the state contracted by 5.7 per cent last year.
“However, growth in the electrical, electronic and electro optical products in 2020 gave the manufacturing sector a boost to expand by 2.8 per cent last year compared to 2.7 per cent in 2019,” he said.
He said the positive growth in the manufacturing sector had softened the impact of the economic slowdown in Penang last year.
He attributed the growth in the manufacturing sector to an increase in global demand for electrical, electronic and electro optical products.
“This subsector contributed 30.8 per cent in Penang’s GDP and increased by 6.4 per cent in 2020,” he said.
He added that Penang contributed about 33 per cent of the total E&E products in the country.
“This trend is predicted to continue for 2021 with an estimation of a higher growth,” he said.
Chow said the Industrial Product Index (IPI) for E&E products during the lockdown showed a growth of 16.5 per cent between January and July this year.
The total sales increased by 14.6 per cent to RM263.8 billion in that period, he added.
However the construction sector in Penang in 2021 is affected due to the increase in Covid-19 cases and the lockdown.
“This sector recorded the highest contraction at 15.5 per cent for 2020,” he said.
He said the services sector is also expected to continue to record a significant drop by 9.5 per cent this year compared to last year.
“The tourism sector was most affected due to the closure of the country’s borders since March 2020,” he said.
He said the domestic tourists to Penang also recorded a drop of 42.2 per cent.
“Medical tourism and Meetings, Incentives, Conventions and Exhibitions (MICE) tourism have also dropped where medical tourism suffered a drop in revenue by 77 per cent for 2020,” he said.
Meanwhile, MICE tourism saw an estimated drop of about 95.7 per cent.
Chow said Penang is expecting its economy to gradually recover in 2022 where the tourism and hospitality industry will recover at an average growth rate that is supported by domestic tourism.
“The economic situation in the state will be balanced by the stable growth of the manufacturing sector especially in the E&E products,” he said.
He said positive growth is reflected in Penang’s exports which is the biggest contributor in the country’s exports at 29 per cent worth RM198.2 billion between January and July 2021.
Within the same period, Penang’s exports grew by 16.3 per cent compared to the first seven months in 2020,” he said.
Chow said he expects this trend to continue due to the high demand for semiconductor projects along with a shortage of chips in the global market.
The Penang lawmaker had tabled a RM935.22 million budget with a projected deficit of RM449.80 million, which is higher compared to this year’s budget.
The state has tabled an increasingly higher budget over the past few years from RM792.66 million in 2020, with a deficit of RM273.5 million, to RM909.82 million this year with a deficit of RM403.8 million.
This is also the 11th consecutive deficit budget Penang had tabled since 2011.