DOSM survey results found 67.8% of firms did not generate any income during the MCO period. While 52.1% of firms stated that the PRIHATIN stimulus package was helpful in easing their business burden, 83.1% still require financial aid from the government as majority of firms stated that the biggest issue facing companies is the labour cost. As a result of Covid-19, 42.5% of firms assess they need more than 6 months for their business to return to normal if Covid-19 is successfully contained.

NEWSBREAK

The Department of Statistics Malaysia (DOSM) released the results of an online survey conducted from 10 Apr to 1 May 2020 to analyse the effects of Covid-19 on firms’ business conditions during the MCO. 4,094 firms participated in this survey, comprising micro (43.4%), small (40.4%), medium (9.1%) and large firms (7.2%). Compared to the national representation, micro business takes up 75% of total sample size, followed by small (20.9%), medium enterprises (2.2%) and large companies (1.5%).

Impact on business. Of the 4,094 firms, 16.5% of respondents said they can only survive for less than 1 month if they provide full pay or half pay leave while slightly over half of companies (53.4%) noted they could survive for only 1-2 months. Less than a third (30.1%) said they could survive beyond 3 months. During this MCO period, 67.8% of firms did not generate any income while only 12.3% earned income through online sales and services. The others are split between physical stores (9.8%) and other channels (15.4%). The main issues faced by firms are salary payment (76.6%), no customers (65.5%) and rental payment (61.4%). Salary payment issues are most prevalent among limited liability companies (88.8%) and partnerships (76.5%) while most individual proprietorships view no customers (70.7%) as the main issue.

Impact on employees. 35.6% of companies are providing full pay leave during the MCO while another third (33.5%) are working from home. On the other end, 16.5% of respondents said they have put their workforce on no pay leave and 3.8% of firms have laid off workers. This implies that 20.3% of firms are not paying their salaries.

Impact of PRIHATIN stimulus. 52.1% of firms found the package helpful in easing their financial burden. 83.1% of firms said they require financial aid/subsidy from the government to survive, followed by tax deductions (67%), deferment of loan repayments (39.1%) and related policy amendments (30.6%). Majority of companies (68.9%) said they have used their internal savings to fund operation costs or working capital while 19.8% utilised borrowing facility during this MCO period.

On duration of recovery post-MCO. 42.5% of firms assess they need more than 6 months for their business to return to normal if Covid-19 is successfully contained. 28.7% require 4-6 months, 17.9% forecast 2-3 months, while 1.9% expect their business to shut down.

HLIB’s VIEW

Digesting the notable points from the survey, it was found that 69.9% of firms were only able to operate for up to 2 months of MCO if they had to pay full or half pay leave to the workers. This could be explained by the fact that 67.8% of companies have not been able to get any income. Consequently, 16.5% of firms have decided to put their staff on no pay leave while 3.8% of firms have laid off employees. While we note that the latest labour market report showed unemployment rate rose to 3.9% in Mar (Feb: 3.3%), the highest since June 2010 due to MCO, the figure may be under-represented as it does not capture those who are on no pay leave or those not looking for job during this MCO period. In addition, 42.5% of firms feel that they would need over 6 months period to recover which could result in more worker layoffs over longer-period and put a dampener on private consumption in 2020 (HLIB forecast: -5.0%). As such, given the “relaxation of MCO” from 4 May onwards (dubbed CMCO), we maintain our 2020 GDP forecast at -6.0% YoY.

Source: Hong Leong Investment Bank Research - 12 May 2020