In the recently released RAM -CTOS Business Confidence Index, business sentiments for 4Q 2022 turned bearish amid continued challenges that are said to be crimping firms’ sales and profitability.
The overall BCI for 4Q 2022 declined for the second consecutive quarter to 46.2, below the neutral mark of 50 which delineates positive and negative sentiment. The survey polled 177 firms, with over 80% of firms surveyed cited increasing costs as the top challenge faced, with the weak economy a close second.
Rising cost of business hurting all firms
Firms surveyed were most pessimistic about their sales outlook and profitability outlook in 4Q 2022. Protracted inflationary pressure on the supply side has started to affect larger firms this round, unlike the previous quarter where it was evident only among micro firms and SMEs. Nearly 70% of firms reported lower profits in the quarter compared to the 1Q 2022 level, a result of higher cost pressures. As expected, the survey results continue to affirm that smaller firms face greater revenue and margin compression than their larger counterparts.
Government assistance much needed
The majority of surveyed firms (69%) voted for government assistance to cope with rising costs as being the most helpful measure. On this note, there are currently numerous government assistance schemes and grants for micro, small and medium enterprises (MSMEs), but these may not specifically alleviate the short-term pains of firms. MSMEs may reap higher benefits from greater centralisation of myriad schemes, better visibility, and the easing of scheme onboarding. Other needed measures include helping to overcome labour shortage issues (49%) and access to bank financing (44%).
Appropriate policy support measures remain crucial for MSMEs
Business optimism has lost steam over the last few quarters as rising costs and weaker demand prospects eat into the performance of businesses. Other challenges faced by firms include the rising interest rate, although survey results showed that the impact remains manageable (cited by about half of the 72% of respondents affected). By all accounts, these challenges are disproportionately felt by the more vulnerable micro-enterprise and SME segments.
The recently installed government has indicated a focus on tackling the cost of living challenges and sustaining the country’s growth momentum next year. With MSMEs contributing around 37% of Malaysia’s GDP, it is imperative that appropriate policy support measures continue to be made available to these segments and are not too prematurely withdrawn.
