Market analysts expects a significant rebound in investment activities in the second half of 2019 as well as a continuous increase in domestic consumption.
This comes as the progression in infrastructure projects like the Light Rail Transit 3 (LRT3) and East Coast Rail Line (ECRL) would boost investment and spending in the medium and long terms, said MIDF Research analyst Adam Mohamed Rahim.
With the construction sector expected to be busier in H2 2019, it would lead to spillover effects on the transportation and storage subsector which are under the services sector.
“This is because precast structure would have to be transported to construction sites,” he added.
Accounting for 57.2% of the country’s total gross domestic product (GDP), the services sector steadily expanded at 6.1% year-on-year in Q2.
The transportation and storage subsector registered the fifth-biggest growth among the 17 services subsectors, increasing seven percent year-on-year during the period.
Malaysia’s economy rose 4.9% in Q2, while the construction sector expanded 0.5% year-on-year.
Notable developments within the construction sector may stem from the outcome of Johor-Singapore Rapid Transit System Link and Pan Borneo Highway Sabah projects, each of which carry a value of RM4.0 billion and RM12.8 billion respectively, said Adam.
Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd, considered the construction sector as an important premise in the economic growth of Malaysia going forward.
“Over dependence on consumer spending could prove to be a risky endeavour as consumer sentiments have been quite weak. In that sense, the momentum may not be sustained,” he told New Straits Times.
With this, the government should play an active role as the private sectors will likely be very cautious with their spending particularly private investment.
“The central bank has cut the OPR and this would help to spur economic activities. As such, accelerating the implementation of infra related projects would complement such in particular the construction and its spillover effects to other related sector,” he said.