Business sentiment for 1Q22 optimistic, but full recovery remains uncertain
KUALA LUMPUR: A survey by RAM Holdings Bhd (RAM) and CTOS Data Systems Sdn Bhd (CTOS) showed that business sentiments for the first quarter of 2022 (1Q22) are positive amid the reopening of the economy.
RAM, in partnership with CTOS, have released their findings through a joint Business Confidence Index (BCI) Survey for first quarter of 2022. As a valuable quarterly metric, the survey generates important information regarding business sentiment that is vital for policy makers to make informed decisions about the future.
The 1Q22 RAM-CTOS BCI, the maiden sub-index of the RAM BCI, concluded in February 2022 showed business sentiment to be positive amid the reopening of the economy.
The overall index charted a positive sentiment reading of 55.4, the first since the start of the pandemic. Readings of the main RAM BCI index for the previous five quarters had hovered below 40.
A reading of above 50 indicates positive or optimistic sentiment.
This quarter’s poll results from over 140 respondents, 75 per cent of which are small and medium enterprises (SMEs) and micro enterprises, may be interpreted as cautious optimism as many firms continue to report significant challenges in the near term.
“Surveyed firms were most bullish about sales and hiring outlook, seen in the respective sub-indices rising to 60.2 and 60.7.
“The share of firms citing economic weakness as a significant challenge dropped to 50 per cent from more than 80 per cent in the same period last year.
“Most firms surveyed nonetheless expect capacity slack to persist, implying demand has not fully normalised as the pandemic may have irrevocably changed consumption habits,” RAM and CTOS said in a joint press statement.
Around 55 per cent of firms surveyed have yet to recover to pre-Covid levels, particularly for business services sector (62 per cent) and smaller SMEs and micro firms (60 per cent).
“Most of these firms foresee full recovery only from 2023. In contrast, only 12 per cent of respondents, mainly from larger corporate firms, said business has surpassed pre-pandemic levels.
“Large corporates likely benefited from the sharp rebound in export sales last year on the back of robust external demand,” it said.
Despite the optimism, the road to full recovery is currently challenged by rising costs, which was cited by 62 per cent of surveyed firms, making it the biggest concern this quarter.
Higher raw material input cost is the most felt by surveyed firms, particularly manufacturing firms, while staffing cost was the next pain point.
The survey results also indicate that SMEs and micro enterprises still trail behind corporates on the path to recovery.
“Although Malaysia’s transition into an endemic phase and the reopening of borders in coming months may boost prospects, firms would have to contend with rising costs and labour shortages that will eat into margins.
“Banks need to keep SMEs adequately funded during the recovery phase. Policymakers should continue to engage with vulnerable firms and address specific needs to ensure a uniform and faster recovery from the pandemic,” it said.
Meanwhile, RAM Group chief executive officer Chris WK Lee commented: “We are pleased to collaborate with CTOS to launch this first sub-index of the RAMCTOS BCI. Since we started the RAM BCI in January 2017, the survey has proven to be a reliable and leading barometer of forward business sentiments in Malaysia.
“With CTOS’s large subscriber base, we hope to capture the sentiments of a much larger pool of businesses that will further strengthen the utility of the BCI.”
CTOS deputy group CEO Eric Hamburger remarked, “Business sentiment is often the first indicator for the future direction of the economy.”
He added, “CTOS has the largest customer base in the industry which allows us to monitor and access credit trends.
“Findings from CTOS Credit Manager concur with the joint survey, with our subscribers pulling 17 more business credit reports since the start of 2022 compared to corresponding period in 2021 to carry out due diligence on new customers and re-evaluate existing customers.
“This is a good sign that businesses are beginning to increase operations and productivity.”