The RAM-CTOS Business Confidence Index (BCI) declined to 50.4 in 3Q 2023 from 54.8 in the previous quarter, ending a two-quarter improvement streak. While the sentiment remains positive for the third successive survey, still-challenging operating conditions are likely to have dented business confidence for the next three months.
The q-o-q drop in the sales and profitability sub-indices was particularly pronounced, consistent with slowing demand and further inflationary pressures. Unsurprisingly, the manufacturing sector registered the lowest overall index reading, given its higher exposure to exports, relative to the business services and retail sectors.
Commenting on the decline in 3Q BCI, Erick Hamburger, Group CEO of CTOS Digital Berhad said, “The shifting landscape of business sentiment is due to the prevailing challenging operating conditions. In such times, cash flow management takes center stage in sustaining a business. Within CTOS, we continue to support SMEs on multiple fronts. We are dedicated to managing business credit risks, and bolstering the resilience of SMEs as they traverse these trying times. In enhancing SMEs’ operational efficiency, we provide cutting-edge digital automated solutions that serve to not only cut costs but also streamline core business processes. We also assist SMEs in recovering bad debt by reinforcing good payment behaviour to help alleviate cash flow challenges. Efforts have resulted in the successful recovery of over RM1 billion annually, further demonstrating our commitment to SMEs and our dedication to fostering their financial resilience.”
Rising costs and weak economy remain key concerns
Rising costs and a weak economy top the list of concerns for the next three to 12 months. Tight cash flow will be a prevalent challenge to micro firms in the next 12 months, more so than to small and medium enterprises (SMEs) and corporates.
Firms want lower income tax rate in Budget 2024
Of the 165 firms surveyed in 3Q 2023, around 64% cited lower income tax rates as the most beneficial measure that Budget 2024 could provide, while 44% wanted utility tariff cuts. If introduced, these would help alleviate cost pressures for businesses.
In a gauge of relief recipients, about 60% of businesses polled said they had not benefited from government assistance. Reasons cited include ineligibility, overly stringent conditions, and a lack of awareness of such programmes. Micro firms surveyed seem to be particularly vexed by the stringency tied to aid schemes, with around a third of them citing this hurdle.
Targeted and timely policy support remains crucial
“Given the prevailing challenges, the upcoming Budget 2024 will be especially pertinent to extend assistance and support to micro, small and medium enterprises (MSME) to help them ride through the challenging environment and help realise the vision of the MADANI Economy,” said Chris W.K. Lee, RAM Holdings Berhad Group CEO and Executive Director.
Provisions of the MADANI Economy framework and the New Industrial Masterplan 2030 indicate that the government is well aware of the need to support MSMEs. Access to financing is a primary challenge often cited by these firms. The key is to communicate support programmes clearly and ensure onboarding or administrative processes are not overly complex or cumbersome for applicants.
