RAM-CTOS BCI: Business optimism moderates in 3Q 2022

Published on 28 Sep 2022.

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KUALA LUMPUR, 28 September 2022 – Rising cost pressures that have stayed elevated in the last few months are weighing on the optimism of businesses and their profit outlook in the near term. The overall index of the RAM-CTOS Business Confidence Index (BCI) for 3Q 2022 receded to 51.4 from a record high of 65.0 in the preceding quarter. Over 80% of the 152 firms polled in this survey cited increasing costs as the top challenge dimming their sentiments. Nonetheless, surveyed firms remained optimistic about the outlook for sales amid the strong demand recovery.

Figure 1: RAM-CTOS BCI – Waning sentiments among businesses in 3Q 2022

* The RAM-CTOS sub-index commenced in 1Q 2022. Data points prior to 1Q 2022 are derived from the main RAM BCI. The threshold that indicates positive sentiment is 50 or higher. 


Rising cost of business denting optimism 

While rising costs have been cited as a top hurdle in our surveys for three consecutive quarters, it had not dented firms’ sentiments until now. These costs, initially thought to be transitory, are unlikely to abate anytime soon, putting businesses under higher pressure.  For the same reason, the share of firms citing labour constraints as a significant challenge stayed high at 53% amid persistent manpower shortage.

These challenges are affecting firms’ operations and profitability, even as the volume of incoming orders remains healthy as indicated by the positive sub-index reading of nearly 56 for revenue outlook. Contrast this to the profitability sub-index of just 46, denoting poor prospects for future profits. The margin pressure is particularly pronounced among smaller firms surveyed that voiced broadly weaker sentiments.

Figure 2: Rising costs a significant challenge especially for smaller firms

Note LHS chart: Percentages sum to more than 100% as firms are allowed to pick more than one response.
Sources: RAM BCI and RAM-CTOS BCI 
SME = Small and Medium Enterprises


Not all firms have raised prices to counter rising costs 

To sustain their business, close to 60% of surveyed firms have raised prices while around 35% kept prices unchanged. Notably, around 80% of micro enterprises had not raised prices, a prominently larger share relative to the overall survey sample. The main reason cited was the fear of losing customers, while some opt to accept lower profit margins.

Looking ahead to the next six months, some firms may need to increase prices further if they are to remain viable.

Figure 3: Fear of turning off demand the main reason for keeping prices unchanged



Strong demand recovery but weaker bottom line

Given robust economic recovery, businesses in general are still optimistic about sales growth as the economy reopens. However, persistent spiralling costs and the challenges in hiring workers are taking a toll on firms’ bottom lines and for the micro and SMEs, their viability in the medium to long term. As such, policymakers are urged to continue providing support, reducing ‘red-tape’ as well as facilitating and offering guidance on accessing various market initiatives and support available to vulnerable micro enterprises and SMEs. The support afforded will allow these firms to capitalise on strong incoming orders and ensure that the nation’s economic recovery remains on a sustainable path.


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

Media contacts
Tho Li Ming
(603) 3385 2511

Shahlini Thirunavukarasu
(603) 2789 1620


The RAM-CTOS Business Confidence Index (RAM-CTOS BCI) is a comprehensive survey jointly conducted by RAM and CTOS, starting 1Q 2022, 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 

About CTOS

CTOS is Malaysia’s leading registered Credit Reporting Agency (CRA), regulated by Ministry of Finance under the Credit Reporting Agencies Act 2010. Established in 1990, CTOS facilitates credit extensions by empowering individuals and businesses with access to crucial information at greater ease and speed. CTOS delivers a complete portfolio of credit risk management solutions and services and is widely used by the country’s banking and financial institutions, insurance companies, telecommunication companies, large corporations, SMEs, legal firms and state bodies. For more information, visit our website at www.ctoscredit.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.

Published jointly by RAM Holdings Berhad and CTOS Data Systems Sdn Bhd
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