Published on 11 Jul 2024.
KUALA LUMPUR, 11 July 2024 – The 2Q 2024 RAM-CTOS Business Confidence Index (BCI) survey indicated that businesses remain broadly optimistic. The overall index came in at 54.0 (1Q 2024: 53.4), staying above the neutral level of 50 for the second consecutive quarter. Corporate sentiment reached a high of 59.3 in 2Q 2024, up from 57.1 in 1Q 2024, while SMEs remained optimistic at 52.6 slightly down from 53.0 in the previous quarter.
Respondents were more sanguine about their business performance outlook in 2Q 2024, with q-o-q improvement in both the sales (+2.1 points to 56.4) and profitability sub-indices (+1.5 points to 50.5). However, profitability sentiment remains relatively soft, just above the 50 neutral mark, inhibited by ongoing cost pressures. Rising cost of doing business continue to top the list of challenges, cited by nearly 80% of the 109 respondents, although this is a decrease from 90% in the previous quarter.
"It is heartening to see positive sentiments in consecutive quarters, which bucks the trend of the past year. As business agility remains key in the coming quarters, we will continue to support businesses by providing real-time data analytics, digital solutions and on-ground training opportunities to ensure that SMEs are equipped to prosper through good times and remain prepared for future challenges," said Erick Hamburger, Group CEO of CTOS Digital Berhad.
Diesel subsidy retargeting appears to have minimal impact on sentiment
Our survey results also show that the recent diesel subsidy retargeting did not appear to have dented sentiment of respondent firms. The 2Q 2024 survey was conducted from 27 May to 18 June. Based on responses received prior to the policy implementation on 10 June, overall sentiment index for corporates and SMEs would amount to 58.0 and 52.9 respectively. Reponses received after 10 June showed a higher sentiment index for corporate at 60.7, while SME sentiment was marginally lower at 52.2.
Regarding the upcoming phase-out of blanket RON95 subsidies, around 67% of the 109 firms polled anticipate price increases for their products or services. Around 70% of respondents reported that RON95 constitutes up to 10% of their overall business costs.
Concerns over increase in labour costs from progressive wage policy
Firms are most concerned about the impact of higher labour costs arising from implementation of the progressive wage policy (PWP), as cited by around 61% of firms. This is followed by uncertainties regarding productivity benchmarks (46%) and compliance costs (42%). Despite these concerns, about 78% of firms foresee some benefits from the adoption of PWP, with enhanced employee morale and satisfaction (53%), greater talent attraction and retention (47%) and improved employee productivity (40%) being the most cited benefits.
Need for increased communication and marketing of PWP
While the PWP is a much-discussed plan among policymakers and researchers, efforts to educate and market it to businesses can be further improved. Our survey indicates that some 52% of respondents have heard of PWP but are not familiar, while almost a quarter stated they are not aware of it at all. Interest is also fairly low, with only about 7% of firms surveyed indicating they would voluntarily participate and the majority, circa 64%, are undecided.
“We welcome the implementation of the PWP, given the potential benefits of a restructured wage system, which links wage increases to training and upskilling. However, a more broad-based adoption is needed to realise its full benefits to the nation as a whole,” said Chris W.K. Lee, RAM Holdings Berhad Group CEO and Executive Director.
Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512
khaijhek@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
Lu Choi Wan
(603) 2789 2256
choiwan.lu@ctos.com.my
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, a value of above 50 indicates positive sentiment, and 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 the 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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