The value-added factor of Malaysia's agriculture sector is envisaged to decline to 3.3 percent this year versus 1.2 percent in 2015 mainly weighed down by lower crude palm oil (CPO) production.

In the first half of 2016 (1H16), the sector contracted six percent due to lower CPO and rubber output (January-June 2015:0.3 per cent), said the Economic Report 2016/2017 released by the Finance Ministry in conjunction with the 2017 Budget tabled by Prime Minister-cum-Finance Minister in Kuala Lumpur today.

Nevertheless, it said the production of food commodities such as livestock, fruits and vegetables grew supported by various government programmes and initiatives to achieve self-sufficiency.

The report said that value-added of agro-food sub-sector grew 4.5 percent in the 1H16 in line with the government's effort to enhance food security (January-June 2015:3.7 percent).

As for CPO production in the first nine months of 2016 (9M2016), the ministry said, it declined sharply by 15.3 percent to 12.6 million due to the fall in fresh fruit bunches yield to 11.6 tonnes.

"For this year, CPO output is expected to be lower at 18 million tonnes compared with 20 million tonnes last year," it said.

On the rubber sub-sector, the price of natural rubber (SMR20) averaged RM5.17 per kilogramme during the 9M2016 due to weak demand from China following anti-dumping and countervailing duties by the US on certain car tyres.

However, it said, prices are expected to remain stable as Thailand, Indonesia and Malaysia are committed to reduce exports under the International Tripartite Rubber Council.

"As an effort to encourage smallholders to continue tapping, the government has increased the activation rate of the Rubber Production Incentive Scheme to RM5.50 per kg and RM2.20 per kg effective January 2016.

"Consequently, rubber prices are expected to stabilise at RM5 per kg in 2016," it said.

Meanwhile, the mining sector grew at a moderate 1.4 percent during the first six months of 2016 supported by the upturn in natural gas.

The report said the value-added of natural gas sub-sector rebounded 1.9 percent due to higher output, particularly from peninsular Malaysia and Sabah fields, compared to -1.8 percent in 2015.

"For 2016, the mining sector is expected to grow 1.1 percent against 4.7 percent last year on account of higher output of natural gas with the increase in capacity following resumption of the Sabah-Sarawak Gas Pipeline project and the commencement of the Sabah Ammonia Urea and Liquefied natural gas Train 9 projects," it said.

However, it said, crude oil output is expected to decline 2.1 percent from 9.8 percent in 2015 due to prolonged low oil prices and rising number of matured oil fields.

The report said notwithstanding the potential Organisation of the Petroleum Exporting Countries' deal to cut production, Brent oil is expected to trade around US$40-US$45 per barrel in the second half of 2016, reflecting the current global uncertainties and continued oil glut.

- Bernama