RAM BCI improving but overall pessimistic sentiment still lingers

Published on 05 Apr 2021.

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The results of RAM’s Business Confidence Index (BCI) survey for 1Q 2021, which was concluded in mid-March, reveal that businesses remain pessimistic through the next three months. Having polled a total of 229 firms across Malaysia, about 93% of which are SMEs and micro enterprises, the overall BCI reached 38.7. This represents an improvement over the index readings of the preceding two quarters, but still significantly below the threshold of 50 – the delineation point for an “optimistic” interpretation.

Figure 1: RAM BCI - Improving trajectory, but pessimism still lingers

Source: RAM BCI
Note: The 1Q 2021 survey was conducted via an online survey, shortly after the lifting of MCO 2.0 on 5 March in the key economic states or federal territories of Selangor, Kuala Lumpur, Penang and Johor. The results and analysis represent anecdotal evidence from a sample of 229 firms, chiefly SMEs and micro enterprises. The results may not be reflective of the larger populations of these segments. We also have no intention of presenting or interpreting them as such. However, the survey provides some insights on the challenges faced by these businesses.

Notably, about 83% of the firms polled cited weak economic conditions as their main concern, with around half of them 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.

MCO 2.0 and its SOPs impedes business operations

The MCO 2.0 was a key stumbling block to surveyed firms, as close to 60% of respondents pointed to a worse performance after MCO 2.0 relative to the earlier Recovery MCO (RMCO) phase. Furthermore, the lack of clarity on standard operating procedures (SOPs) has hurt businesses. Close to 60% of firms surveyed cited this as an impediment to their operations, which in turn affected business confidence. This is especially true for the services sector that is most sensitive to social restrictions - an outcome also verified by our survey results. While lockdowns may help stem the tide of infections, policymakers should clearly communicate guidelines and SOPs to minimise unnecessary disruptions.

Figure 2: Clear SOPs important for business confidence

Source: RAM BCI

Non-manufacturing and services sectors also need assistance

To gauge SMEs’ feedback on the various government stimulus packages, we had asked respondents how helpful these have been, specifically on the RM15 bil PERMAI stimulus package unveiled in January 2021. While SMEs and enterprises expressed appreciation for the assistance, many (47%) in our survey did not qualify for such aid. This could be partly attributable to the highly targeted nature of the PERMAI scheme. Of the 53% that qualified, only 13% found PERMAI helpful; the rest did not, for reasons unknown to us. It is clear that apart from the hardest hit aviation, hospitality and tourism sectors, many firms in the non-manufacturing and services sectors still need some form of support to remain viable. The overall RAM BCI index readings for business services and retail are relatively low at a respective 38.9 and 40.0, compared to 43.0 for the manufacturing sector.

It is therefore timely that the Government launched the RM20 bil PEMERKASA scheme on 17 March 2021. About 83% of the firms surveyed indicated that they would welcome yet another round of stimulus. It is also heartening to highlight that 12% of the surveyed firms try to manage on their own resources instead of over relying on government handouts. This hints at a strong survival instinct that bodes well for entrepreneurship.

Figure 3: More assistance required

Source: RAM BCI
Note – RHS Chart: As the survey was concluded prior to the rollout of the PEMERKASA stimulus package, the responses do not reflect the sentiment after the follow-up package.


Malaysia is still treading on fairly fragile ground despite the ongoing vaccination programme and nascent economic recovery. Most SMEs would be hard pressed to survive another round of MCO; 90% of respondents said they would be negatively affected by a further extension with 35% claiming they would not survive it. Inability to survive another MCO is even more pronounced among micro enterprises (42%). 

While the recent loosening of restrictions under the CMCO/RMCO is welcomed by all businesses, 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 will ensure that SMEs and micro enterprises - the backbone of Malaysia’s economy – remain vibrant and emerge stronger than before from the pandemic.


The RAM Business Confidence Index (RAM BCI) is a comprehensive survey conducted by RAM on forward looking business sentiment and topical issues faced by the small and medium business community in Malaysia. Released quarterly, the index offers a timely barometer of future economic activity to guide businesses’ investment decisions and planning as well as provide inputs for strategic policymaking by various stakeholders of the economy. This is done through the indication of positive and negative sentiment on five key aspects that are pertinent to their business operations over the next three months. The five business aspects surveyed are turnover, profitability, hiring, capital investment and capacity utilisation. An index value of 50 is the neutral benchmark while a value above 50 indicates positive sentiment by the firm; below 50 shows negative sentiment.


Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512

Media contact
Padthma Subbiah
(603) 3385 2577


About RAM Holdings Berhad

RAM Holdings is a leading provider of independent credit research and advisory services. RAM Holdings (formerly known as Rating Agency Malaysia Berhad) was established in November 1990 as a catalyst for the domestic debt-capital market and as the nation’s first credit-rating agency. Its shareholders comprise both local and foreign financial institutions. On 1 July 2007, the rating operations were novated to a newly formed subsidiary, RAM Rating Services Berhad (or RAM Ratings). Today, RAM Holdings spearheads the cultivation of new businesses and continues to provide training as well as economic research that promotes financial and credit expertise, in addition to soft skills. For more information, log on to www.ram.com.my 

No statement in this paper is to be construed as a recommendation to buy, sell or hold securities, or as investment advice, as it does not comment on the security's market price or suitability for any particular investor.

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