KUALA LUMPUR: The SME Sentiment Index rose from 53.5 in the second half of 2023 to 54.7 in the first half of 2024.

SME Bank group president and chief executive officer Datuk Wira Dr. Aria Putera Ismail attributed this increase to better economic outlook, improved cash flow, and higher liquidity buffers among micro, small, and medium-sized enterprises (MSMEs).

"These results reflect the optimism, resilience, and adaptability of our MSMEs as they navigate Malaysia's steady economic recovery.

"It resonates strongly with the government's effort under the Madani Economy framework, which aims to rejuvenate the Malaysian economy by fostering inclusive and sustainable growth.

"The improved sentiment among MSMEs underscores their critical role in this economic revival, highlighting their ability to adapt and thrive in a dynamic business environment," Aria Putera said.

SME Bank chief economist Lynette Lee Li Qing said that the sentiment aligns with Malaysia's gross domestic product (GDP) growth forecast of 4 per cent to 5 per cent for 2024, up from a 3.6 per cent increase in 2023.

"Malaysia's economy continued to expand by 4.2 per cent year-on-year in the first quarter of 2024 (1Q24), surpassing the 2.9 per cent growth recorded in the previous quarter," she said in a statement.

Lynette noted that other forward-looking indicators, such as the Malaysia Institute of Economic Research (MIER) consumer sentiment index and the Department of Statistics Malaysia (DOSM) business tendency statistics, also indicate sustained economic expansion.

"Nonetheless, challenges persist regarding profitability, employment decisions, and expansion initiatives amidst a high-cost environment," she added.

SME Bank has published the results of its SME Sentiment Index for 1H24, showing a rise in confidence among MSMEs compared to the previous survey.

The survey revealed that MSMEs now have a more balanced outlook on the economy for the next 6 to 12 months. 

Additionally, 38 per cent of respondents anticipate economic expansion, up from 33 per cent in 2H23, while the proportion expecting a slowdown has decreased to 37 per cent, down from 54 per cent in 2H23.

"This optimism is likely supported by strong household spending, a healthy labour market, government cash aid, robust investment activities, and a recovery in exports and tourism," it added.

Additionally, 53 per cent of respondents expect higher revenue in the next 6 to 12 months, down from 66 per cent in the previous survey.

The decline highlights challenges like increased competition and a higher-cost environment.

"By sector, the highest sales expectations are in the manufacture of chemicals (78 per cent), accommodation (69 per cent), and food products (68 per cent).

"Regionally, MSMEs in Sarawak (89 per cent) and Sabah (75 per cent) are the most optimistic, particularly in the construction sector," the survey further stated.

https://www.nst.com.my/business/corporate/2024/07/1071714/sme-sentiment-index-first-half-better-economic-outlook-says-sme