Published on 14 Dec 2022.
KUALA LUMPUR, 14 December 2022 – Business sentiments for 4Q 2022 turned bearish amid continued challenges that are crimping firms’ sales and profitability. The overall RAM-CTOS Business Confidence Index (BCI) for 4Q 2022 declined for the second consecutive quarter to 46.2 (3Q 2022: 51.4), below the neutral mark of 50 which delineates positive and negative sentiment. The survey polled 177 firms, with over 80% of firms surveyed cited increasing costs as the top challenge faced, with the weak economy a close second.
Figure 1: Overall sentiment turned negative in 4Q 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.
Sources: RAM BCI and RAM-CTOS BCI
Rising cost of business hurting all firms
Firms surveyed were most pessimistic about their sales outlook (down 14.0 points to 41.8) and profitability outlook (down 10.7 points to 35.4) in 4Q 2022. Protracted inflationary pressure on the supply side has started to affect larger firms this round, unlike the previous quarter where it was evident only among micro firms and SMEs. Nearly 70% of firms reported lower profits in 4Q 2022 compared to the 1Q 2022 level, a result of higher cost pressures. As expected, the survey results continue to affirm that smaller firms face greater revenue and margin compression than their larger counterparts.
Figure 2: Profits not keeping pace with sales due to cost pressures
Sources: RAM BCI and RAM-CTOS BCI
Government assistance much needed
The majority of surveyed firms (69%) voted for government assistance to cope with rising costs as being the most helpful measure. On this note, there are currently numerous government assistance schemes and grants for micro, small and medium enterprises (MSMEs), but these may not specifically alleviate the short-term pains of firms. MSMEs may reap higher benefits from greater centralisation of myriad schemes, better visibility and the easing of scheme onboarding. Other needed measures include help to overcome labour shortage issues (49%) and access to bank financing (44%).
Figure 3: Government help in tackling rising costs and labour shortages most requested
* Percentages sum to more than 100% as firms are allowed to pick more than one response
Source: RAM-CTOS BCI
Appropriate policy support measures remain crucial for MSMEs
Business optimism has lost steam over the last few quarters as rising costs and weaker demand prospects eat into the performance of businesses. Other challenges faced by firms include the rising interest rate, although survey results showed that the impact remains manageable (cited by about half of the 72% respondents affected). By all accounts, these challenges are disproportionately felt by the more vulnerable micro enterprise and SME segments.
The recently installed government has indicated a focus on tackling cost of living challenges and sustaining the country’s growth momentum next year. With MSMEs contributing around 37% of Malaysia’s GDP, it is imperative that appropriate policy support measures continue to be made available to these segments and are not too prematurely withdrawn.
Woon Khai Jhek, CFA
(603) 3385 2512
Tho Li Ming
(603) 3385 2511
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
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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