RAM BCI: Businesses more concerned about outlook in 1Q 2025

Published on 10 Apr 2025.

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KUALA LUMPUR, 10 April 2025 – The RAM Business Confidence Index (BCI) for 1Q 2025 recorded a notable decline in forward-looking business sentiment. The overall index fell to 41.1 from 54.5 in the preceding quarter, marking a return to pessimistic prospects for the next three months and ending a year-long streak of positive sentiment. All sub-indices declined Q-o-Q, with a more pronounced weakness observed in the sales, profitability and hiring sub-indicators.

Commenting on the deteriorating sentiment, Chris W.K. Lee, RAM Holdings Berhad Group CEO and Executive Director said, “The latest BCI readings align with the rapidly escalating global risks, particularly stemming from rising US protectionism. This situation is further complicated by domestic challenges, particularly concerns over the increase in labour costs. The latest round of US reciprocal tariffs announced in early-April confirms this initial business pessimism, as the disruption to global trade flows threatens to directly impact export sales and indirectly dampen domestic business activities.”

The latest BCI survey was conducted from 17 February 2025 to 27 March 2025, whereby more than half of the 69 firms polled reported having some revenue exposure to exports. Weak economic conditions emerged as a top concern in 1Q 2025, with the share of firms citing it surging to 77% from 61% in 4Q 2024. This brings it on par with the rising cost of doing business, which also remained a key challenge cited by 77% of firms (4Q 2024: 80%).

Minimum wage hike compels firms to reassess strategies

In response to the thematic query about the impact of the minimum wage increase on labour costs, 45% of firms surveyed anticipate a cost increase of up to 10%. Only 12% of respondents, predominantly micro firms granted a grace period, expect no impact. To mitigate higher labour costs, improving operational efficiency is the preferred route by businesses.

Higher costs looms from EPF policy for foreign workers

The upcoming mandatory EPF contributions for foreign workers, likely to take effect in 4Q 2025, is another source of cost pressures for firms surveyed. A majority (58%) of firms expect that the new contribution rule will result in higher costs and administrative burdens. Around 39% of firms surveyed plan to raise prices to pass on some of these costs.

Mounting business pressures warrants policymakers to thread with care

The BCI findings indicate that businesses are facing increasing pressures in the current economic landscape, marked by a bleaker global economic outlook and shrinking profit margins due to rising costs. In this rapidly evolving economic environment, it is crucial for policymakers to act swiftly and implement appropriate support measures to help Malaysian businesses transition and emerge stronger. 

 

Analytical contact
Nur Rasyidah Abd Karim
(603) 2708 8208
rasyidah@ram.com.my 

Woon Khai Jhek, CFA
(603) 2708 8286
khaijhek@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my 

 

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, 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 

 

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 by RAM Holdings Berhad 
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