Business sentiments for 1Q 2023 improved as challenges faced by firms eased slightly. The overall RAM-CTOS Business Confidence Index (BCI) for 1Q 2023 rose to 51.4 from 46.2 in the previous quarter. An index of 50 delineates positive and negative sentiments. While sentiments across several sub-indices showed improvement, firms remain pessimistic on their profitability outlook (sub-index reading: 40.4) amid elevated cost pressures. Of the 122 firms polled in 1Q 2023, chiefly small and medium enterprises, almost 80% are grappling with rising costs as their top challenge.
“In 1Q 2023, CTOS SME subscribers accessed 30% more business reports as compared to same period last year. Businesses carrying out additional due diligence on new customers and re-evaluating existing customers is a good indicator that they are ramping up operations and productivity, which is in line with the RAM-CTOS BCI business sentiment findings” commented Erick Hamburger, Group CEO of CTOS Digital Berhad.
“The return to positive sentiment this quarter is a good sign for the economy as SMEs play a crucial role in driving economic growth. At CTOS, we are committed to supporting SMEs in their growth journey by providing them with the necessary financial solutions and credit information to make informed decisions” he added.
Surveyed firms more receptive to revised Budget 2023
The recently tabled revised Budget 2023 was generally well-received by respondent firms and may have partly contributed to the better sentiments in this survey. About 30% of firms polled thought measures in the revised budget would help their business – a much higher figure compared to the 9% in the 4Q 2022 survey, for the same question. Some 18% of respondents did not find the revised budget helpful, a markedly lower number in contrast with 56% in the previous quarter. Not surprisingly, the more positive reaction may be attributed to the slew of “goodies” announced, particularly for micro, small and medium enterprises (MSMEs). The revised Budget 2023 is the largest on record, with an allocation of RM386.1 bil, which includes measures like the cut in the corporate tax rate and various loan and financing schemes for MSMEs.
Elevated costs still the bane of SMEs
The majority of firms surveyed (56%) increased prices in the last six months to combat rising costs. This was, however, inadequate to fully arrest earnings deterioration. Of the respondents that initiated price increases, around half still reported narrower profit margins. Most likely, firms had not fully passed on cost increases for fear of losing customers. Indeed, the survey found that 43% of firms that raised prices experienced customer churn.
Policy support remains crucial for MSMEs to meet current challenges
Notwithstanding the improvement in business prospects in 2023, elevated cost pressures remain the current significant hurdle for MSMEs. “The slew of policy measures in the revised Budget 2023, which were generally well-received by MSMEs, would help them overcome these challenges. The measures, particularly loan and financing schemes, need to be made easily accessible and disbursed expediently to qualifying firms to support their viability”, highlights Chris Lee, Group CEO and Executive Director of RAM Holdings Berhad.
