Pikom remains bullish on ICT sector despite GDP downgrade

• ICT services sector to reach US$17.56 billion this year
• Even a watered down TPPA will impact us: Pikom

THE National ICT Association of Malaysia (Pikom) remains bullish on the ICT sector and expects the ICT services sector to grow by 10.96% this year, despite lowering its gross domestic product (GDP) forecast for 2016 and 2017.

According to its chairman Chin Chee Seong, the ICT industry's share to the country's economy has grown from 16.5% in 2010 to 17.6% in 2015. The association is also confident that the share of the overall ICT industry to the economy is on track to reach 20% by 2020.

One of the reasons for Pikom's optimism is the ongoing growth momentum of the country's ICT services sector -- which is expected to grow by double-digits to US$17.56 billion (RM77.5 billion) this year.

"The underlying growth in the industry arises from the ICT services sector -- clocking an average annual growth rate of 11% at RM70.2 billion in 2015 and to reach RM77.5 billion in 2016.

"The ICT services sector alone contributed up to 6.6% of GDP in 2016 and is projected to reach 7% by end 2016," said Chin during its media conference in Petaling Jaya last Friday.

During the briefing, the association also lowered its forecasts on Malaysia's 2016 and 2017 GDP at 4.2% and 4.0%, respectively. Its 2016 GDP forecast is also in-line with Malaysian Institute of Economic Research's forecasts.

Previously, Pikom estimated that the country's 2016 and 2017 GDP growth will be at 4.5%. 

According to the Department of Statistics Malaysia, Malaysia recorded a GDP growth of 4.2% in the first quarter this year and 4.0% in the second quarter. The economy picked up in the third quarter, with a GDP growth of 4.5%.

"Pikom expects the strong performance in the thir quarter to be carried through to the fourth quarter, ending the year with an overall estimated GDP growth of 4.2%," said Chin.

He added that the new forecast has factored in various elements -- including the depreciation of the ringgit against the greenback, the unexpected outcome of the Brixit vote and the US presidential election results, as well as the uncertain future of the Trans-Pacific Partnership Agreement (TPPA). 

He said that the association is taking a conservative approach with regards to the revised GDP growth forecasts, to take into account the potential long term impact of these factors on the economy. 

"We are living in uncertain times and we cannot ignore the impact that these factors could have on the future of our economy and our country; in particular the potential changes in US economic policies and the threat of a slower Chinese economy.

"The lower forecasts is based on concerns over uncertainties and upward risks in the external environment," said Chin. 

Meanwhile, Pikom Research Committee chair Woon Tai Hai said that the ringgit is expected to remain weak over the next several months -- even though the government announced measures to support the ringgit. 

"I think the ringgit will still be weak. When you turn a big ship, when you want it to make a U-turn, it will take a long time. I think it will take at at least six months," said Woon.

One of the factors that could hurt Malaysia the most is the outcome of the TPPA. 

"It is going to impact us significantly. Even a watered down TPPA will impact us, as we are an export-oriented economy. I think it will be a challenge for us, the industry, to even minimise the impact.

"Only thing we can do now is to create the awareness, and channel back the information to the government.

"I believe the government can do a better role in minimising the impact. The retailers and the exporters will be impacted the most, as they will be at the lower part of the fruit chain," said Woon. 

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