RAM survey shows business confidence in Malaysia improving, but overall pessimistic sentiment still lingers

The rating agency said about 83 per cent of the firms polled cited weak economic conditions as their main concern, with around half of the firms expecting their revenue and profit to keep declining in the next quarter. — Picture by Ahmad Zamzahuri
The rating agency said about 83 per cent of the firms polled cited weak economic conditions as their main concern, with around half of the firms expecting their revenue and profit to keep declining in the next quarter. — Picture by Ahmad Zamzahuri

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KUALA LUMPUR, April 5 — The RAM Business Confidence Index (RAM BCI) survey for the first quarter (Q1) 2021 revealed that businesses in Malaysia remain pessimistic through the next three months.

In a statement, RAM Rating Services Bhd (RAM Ratings) said RAM BCI for Q1 2021 reached 38.7 points from a poll of 229 firms across the country, of which 93 per cent comprised small and medium enterprises (SMEs) and micro enterprises.

“This represents an improvement over the index readings of the preceding two quarters, but still significantly below the threshold of 50 points, the delineation point for an optimistic interpretation,” it said.

The rating agency said about 83 per cent of the firms polled cited weak economic conditions as their main concern, with around half of the firms expecting their revenue and profit to keep declining in the next quarter.

Given their bleak outlook, it is not surprising that most of them are also not ready to hire or expand their capacity.

“Malaysia is still treading on fairly fragile ground despite the ongoing vaccination and nascent economic recovery.

“Most SMEs would be hard pressed to survive another round of movement control order (MCO), with 90 per cent of respondents saying they would be negatively affected by a further extension, and 35 per cent claiming they would not survive it.

“Inability to survive another MCO is even more pronounced among micro enterprises, at 42 per cent,” it added.

RAM Ratings noted that many firms in the non-manufacturing and services sectors still needed some form of support to remain viable.

“The overall RAM BCI index readings for business services and retail are relatively low at 38.9 and 40.0 respectively, compared with 43.0 for the manufacturing sector,” it said.

The rating agency also said the MCO 2.0 and its Standard Operating Procedures (SOPs) have impeded business operations.

The MCO 2.0 was a key stumbling block for surveyed firms, as close to 60 per cent of respondents pointed to a worse performance after MCO 2.0 relative to the earlier Recovery MCO (RMCO) phase.

The lack of clarity on SOPs has hurt businesses which in turn affected business confidence. This is especially true for the services sector that is most sensitive to social restrictions.

While lockdowns may help stem the tide of infections, policymakers should clearly communicate guidelines and SOPs to minimise unnecessary disruptions.

While the recent loosening of restrictions under the CMCO/RMCO is welcomed by all businesses, RAM Ratings said policymakers should keep engaging SMEs and micro enterprises across the services and non-manufacturing sectors to provide the necessary assistance as businesses rebuild and revitalise operations.

This, it added, will ensure that SMEs and micro enterprises — the backbone of Malaysia’s economy — remain vibrant and emerge stronger than before from the pandemic. — Bernama

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