Published on 30 Sep 2021.
Business sentiment among SMEs improved in the third quarter of the year, recovering from the slump recorded in the last quarter’s survey amid the reimposition of the Movement Control Order (MCO) 3.0. The 3Q 2021 RAM Business Confidence Index (BCI) survey, concluded in mid-September, saw the indicator recover to 41.4 from 33.2 in the preceding quarter. The overall index and sub-indices however are still well below the positive sentiment threshold of 50. This quarter’s poll of some 78 respondents shows firms are not yet out of the woods as they continue to face the lingering effects of the pandemic along with other emerging challenges.
The improvement in the overall index was led by increases in the sales and profitability sub-indices, which respectively rose to 45.9 (+21.0 points) and 37.0 (+13.9 points). Most firms surveyed nonetheless indicate they are not ready to hire or to expand capacity. Economic weakness still dominates the list of challenges cited by surveyed firms (81% of firms polled), followed by the rising cost of doing business (66%).
Staying afloat clearly the main priority of firms surveyed
Surviving the current crisis remains the primary concern of close to 60% of firms. Another 17% polled have made building cash buffers their focus.
Most firms back in business but yet to return to full capacity
As restrictions are gradually relaxed and sectors reopen, close to 80% of firms surveyed have resumed operations. Of this, some 42% recently reopened amid the relaxation of controls while 36% are essential service providers that have stayed in business during the MCO period.
The majority of respondents are not yet fully operational and continue to operate below full capacity. Fewer than 20% of respondents are currently operating at full force. Around 32% expect to be fully operational by 4Q 2021 while another 33% expect a return to normalcy by 1Q 2022.
Is this the beginning of recovery?
While the relaxation of restrictions and reopening of most sectors is imperative to pivot Malaysia towards recovery, business operations would need time to ramp up to pre-pandemic capacity given the prolonged lockdown. SMEs are still in need of continued financial aid and support as uncertainties over the containment of new waves of infection remain, moving into next year. We applaud the various stimulus packages for small businesses but urge policymakers to continue direct and indirect support measures to facilitate the recovery and ensure the long-term survival of these firms.
Woon Khai Jhek, CFA
(603) 3385 2512
Tho Li Ming
(603) 3385 2511
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.
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
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