FINDINGS of RAM Holdings Bhd’s Business Confidence Index (BCI) survey for 1Q 2021 (concluded in mid-March) revealed that businesses remain pessimistic through the next three months.
Having polled a total of 229 firms across Malaysia – about 93% of which are SMEs and micro enterprises – the overall BCI reached 38.7.
This represents an improvement over the index readings of the preceding two quarters, but still significantly below the threshold of 50 – the delineation point for an “optimistic” interpretation.
Notably, about 83% of the firms polled cited weak economic conditions as their main concern with around half of them expecting their revenue and profit to keep declining in the next quarter.
“Given their bleak outlook, it is not surprising that most of them are also not ready to hire or expand their capacity,” commented the rating agency.
“The MCO 2.0 (movement control order implemented from Jan 13 to March 4) was a key stumbling block to surveyed firms as close to 60% of respondents pointed to a worse performance after MCO 2.0 relative to the earlier Recovery MCO (RMCO) phase.”
Furthermore, the lack of clarity on standard operating procedures (SOPs) has hurt businesses. Close to 60% of firms surveyed cited this as an impediment to their operations which in turn affected business confidence.
This is especially true for the services sector that is most sensitive to social restrictions – an outcome also verified by our survey results. While lockdowns may help stem the tide of infections, policymakers should clearly communicate guidelines and standard operating procedures (SOPs) to minimise unnecessary disruptions.
“Malaysia is still treading on fairly fragile ground despite the ongoing vaccination programme and nascent economic recovery,” observed RAM.
“Most SMEs would be hard pressed to survive another round of MCO; 90% of respondents said they would be negatively affected by a further extension with 35% claiming they would not survive it.
“Inability to survive another MCO is even more pronounced among micro enterprises (42%).”
While the recent loosening of restrictions under the conditional MCO (CMCO)/RMCO is welcomed by all businesses, RAM urged policymakers to keep engaging SMEs and micro enterprises across the services and non-manufacturing sectors to provide the necessary assistance as businesses rebuild and revitalise operations.
“This will ensure that SMEs and micro enterprises – the backbone of Malaysia’s economy – remain vibrant and emerge stronger than before from the pandemic,” added RAM. – April 5, 2021
