German companies in Malaysia expect a more promising outlook for business development in the next 12 months despite naming inflation as a top concern in the next five years, the latest AHK World Business Outlook Spring 2023 survey found.
The bi-annual survey which captures the sentiments of German firms operating in Malaysia saw 70.5% of respondents saying they expect better business development while 53.3% said their company’s current business situation remained unchanged. In terms of the companies’ evaluation of the Malaysian economic development for the next 12 months, 51.1% said the condition would remain the same and 33.3% expect things to be better – these trends signal a continued positive outlook that indicates normalised economic activity and a steady rebound after external shocks from the past few years.
53.3% of German companies in Malaysia also said they will continue to invest locally while 28.9% intend to increase their expenditure to develop their business. In line with this, more than half (51.1%) of the companies surveyed said they will be increasing the number of employees. “In the face of high inflation rates globally and – particularly in Europe – increasingly dirigiste measures from the governments, employers are struggling with challenging market conditions. On the other hand,
optimism in creating a brighter job market and increased labour demands is good news for Malaysia’s declining unemployment rate which is typically associated with a growing economy,” said Daniel Bernbeck, Executive Director at the Malaysian-German Chamber of Commerce and Industry (MGCC).
“As the official voice of German trade in Malaysia, our latest Spring 2023 survey indicates a positive outlook for the Malaysian economy that echoes the views of many economists who believe that Malaysia will not likely fall into a recession this year.” In terms of the most significant risks German businesses foresee in the next 12 months, respondents said
demand would be a concern (62.2%) followed by a shortage of qualified workers (51.1%), economic policy
framework conditions (33.3%), raw material prices (31.1%) and labour costs (26.7%).
When asked what are the biggest geopolitical challenges for German businesses in Malaysia in the next five years, half of the respondents named inflation as a top concern (50%). Secondly, businesses voiced concern over the geo-economic fragmentation and an increase in political influence on supply chains through legislation and trade barriers (45.5%). In third place, 38.6% said the security of raw materials and energy supply would be a hurdle for businesses in the next five years
“Amid fierce competition in the region and global economic uncertainties, Malaysia’s political stability along with its open market policies, infrastructure and diverse talent pool will enable it to continue to achieve its goal as a foreign direct investment (FDI) destination and to weather the challenges ahead,” Bernbeck added. To further cushion businesses from external shocks which the global community faced from various shortages that ensued from the Covid-19 lockdowns across the world, half of the German firms in Malaysia surveyed said they prefer to source for supplies domestically for their supply chain diversification strategy and when entering new markets. German businesses based here also chose proximity, favouring neighbouring countries such as Indonesia, Thailand and Singapore for their supply chain needs and new market considerations.
The AHK World Business Outlook is based on a survey of member companies of the German Chambers of Commerce Abroad, Delegations and Representative Offices (AHKs) amongst over 40,000 member companies in 92 countries around the world. It is a bi-annual research exercise conducted by the Association of German Chambers of Commerce and Industry
