THE gross fixed capital formation (GFCF), the second largest component of the gross domestic product (GDP with a 20.9% share in the economy, contracted 14.5% to RM281.1 billion (constant prices) last year compared to 2019, the Statistics Department said today.

Chief statistician Dr Mohd Uzir Mahidin said the contraction was mainly due to the Covid-19 pandemic which affected investment in fixed assets for all economic activities. 

“The decline in 2020 was the biggest contraction since the 1998 Asian financial crisis in which GFCF declined 43%,” he said in a statement today.

He said declining GFCF was also experienced by major economies and neighbouring countries Singapore, Thailand and Indonesia.

Uzir said the continuous reduction in fixed assets investment could lead to lower production capacity and subsequently distort the growth of potential output. 

“By type of economic activity, the GFCF in the services sector contracted to 12.5% compared with 1.6% in the preceding year,” he said.

He said transport and storage and information and communication declined 24.9% while finance, insurance, real estate and business services saw the GFCF drop to -10.9%.

“GFCF in the manufacturing sector dropped by 17.1% against a decline of 10% in the previous year,” he said.

He said the sluggish performance of the sector was attributed to a 24.4% drop in petroleum, chemical, rubber and plastic products.

Uzir said electrical, electronic and optical products and transport equipment contracted 17.2% to weigh down the overall performance of the manufacturing sector. 

He said non-metallic mineral products, basic metal and fabricated metal products and textiles and wood products contracted 15.1% and 7.8%, respectively.

“In 2020, GFCF for mining and quarrying declined by 25.4% from a decrease of 9.3% in the preceding year,” he said.

“Construction sector also went down 2.2%, steeper than the decline of 1.3% recorded in the previous year, while agriculture sector contracted 8.8% against 0.1% in 2019 due to the weakened performance in all sub-sectors,” he said.

Meanwhile, he said by type of assets, structure remained as the major contributor to GFCF with a share of 55.9%, declining 18.3% in 2020 compared to the previous year.

He said information and communications technology (ICT) equipment and other machinery and equipment dropped to 8.9%, while Intellectual property products grew marginally at 0.6%.

On the other hand, he said the private sector continued to be the main contributor to GFCF with a share of 74.9%, a decline of 11.9% as compared to the preceding year.

He said the public sector, which contributed 25.1%, also showed a similar downward trend, recording a further decrease of 21.3% in 2020.

“Services and manufacturing activities were the main contributors in GFCF of private sector. The share of services activity stepped up to 62.9% while manufacturing activity retained its position as the second contributor with a share of 20.9%.

“The remaining activities made up 16.2% of the total GFCF of the private sector,” he said. 

He said GFCF of the public sector was largely dominated by services with the highest share of 80.6%, followed by mining and quarrying and manufacturing activities at 10.7% and 7.9% share respectively.

He added the GFCF is expected to start to recover this year.  – Bernama, July 26, 2021.