KUALA LUMPUR (April 4): Business sentiment in the country was positive in the first quarter of 2022 (1Q22) amid the reopening of the economy, according to a survey by RAM Holdings Bhd and CTOS Data Systems Sdn Bhd.
The Business Confidence Index (BCI) Survey found that the overall index charted a positive sentiment reading of 55.4, the first since the start of the pandemic.
A reading of above 50 indicates positive or optimistic sentiment.
Readings of the main RAM BCI index for the previous five quarters had hovered below 40, RAM and CTOS said in a statement.
According to the two agencies, the 1Q22 poll results from over 140 respondents, 75% of which are small and medium enterprises (SMEs) and micro enterprises, may be interpreted as cautious optimism, as many firms continue to report significant challenges in the near term.
Surveyed firms were most bullish about sales and hiring outlook, seen in the respective sub-indices rising to 60.2 and 60.7, with the share of firms citing economic weakness as a significant challenge dropping to 50% from more than 80% in the same period last year.
Most firms surveyed nonetheless expect capacity slack to persist, implying demand has not fully normalised as the pandemic may have irrevocably changed consumption habits.
Not surprisingly, around 55% of firms surveyed have yet to recover to pre-Covid levels, particularly for the business services sector (62%) and smaller SMEs and micro firms (60%), with most of these firms foreseeing full recovery only from 2023, according to the survey.
In contrast, only 12% of respondents, mainly from larger corporate firms, said business has surpassed pre-pandemic levels, whereby large corporates had likely benefited from the sharp rebound in export sales last year, on the back of robust external demand.
In addition, both RAM and CTOS highlighted that the road to full recovery is currently challenged by rising costs, which was cited by 62% of surveyed firms, making it the biggest concern this quarter.
They also found that higher raw material input cost is the most felt by surveyed firms, particularly manufacturing firms, while staffing cost was the next pain point.
“Our survey results indicate that SMEs and micro enterprises still trail behind corporates on the path to recovery,” said RAM and CTOS.
“Although Malaysia’s transition into an endemic phase and the reopening of borders in coming months may boost prospects, firms would have to contend with rising costs and labour shortages that will eat into margins.
“Banks need to keep SMEs adequately funded during the recovery phase. Policymakers should continue to engage with vulnerable firms and address specific needs to ensure a uniform and faster recovery from the pandemic,” they added.
“Since we started the RAM BCI in January 2017, the survey has proven to be a reliable and leading barometer of forward business sentiments in Malaysia,” RAM group CEO Chris W.K. Lee said in the statement.
“With CTOS’s large subscriber base, we hope to capture the sentiments of a much larger pool of businesses that will further strengthen the utility of the BCI,” Lee said.
CTOS Digital Bhd deputy group CEO Eric Hamburger said business sentiment is often the first indicator for the future direction of the economy.
“CTOS has the largest customer base in the industry, which allows us to monitor and access credit trends.
“Findings from CTOS Credit Manager concur with the joint survey, with our subscribers pulling 17% more business credit reports since the start of 2022 compared to corresponding period in 2021, to carry out due diligence on new customers and re-evaluate existing customers.
“This is a good sign that businesses are beginning to increase operations and productivity,” he said.
Source: TheEdge - 5 Apr 2022
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