‘Efforts to boost economy through expansionary fiscal budget will boost BCI in near term’

KUCHING: The massive fiscal efforts to boost the economy through expansionary fiscal budget will boost sentiment and therefore, the Business Conditions Index (BCI) in the near term, analysts note.

To recap, the Malaysian Institute of Economic Research (MIER) highlighted that the BCI has improved slightly, increasing by 9.5 points to settle at 97 points in the third quarter of 2021 (3Q21).

“While sales in 3Q21 have increased, domestic and external orders are trending up. Both production and capital investment also slowed down quarter-onquarter. Business conditions are expected to improve going forward,” MIER said.

According to the research arm of Public Investment Bank Bhd (PublicInvest Research), sentiment could have been better if not for the Covid-19 restrictions which culminated in several phases of the National Recovery Plan (NRP) which started in June 2021, almost full three months of partial economic closure.

“This had taken a toll on production and capital investment which is not surprising given strict Standard Operating Procedures (SOPs), a bane especially for manufacturing and services sectors. This was further affected by the on-going supply chain disruptions which lengthened the delivery time for some sectors. Manpower shortages were also a dampener no thanks to strict requirement for returning labor.

“International borders that remained closed also weighed on sentiment given prolonged disruption in business process and dealings,” PublicInvest Research said.

The research arm noted that overall, businesses were more cautious given stronger headwinds especially manpower shortages which could take time to regularise.

“This is expected to improve thanks to full economic openings since October (Phase 3 and 4 of National Recovery Plan), and underpin the acceleration in capital expansion and hiring which have slowed down since the unfolding of Covid-19. The massive fiscal efforts to boost the economy through expansionary fiscal budget will also boost sentiment and therefore, the BCI in the near term. This will also be pushed by full economic openings in major economies (North America, Eurozone, China), gradual improvement in the global supply chains and Covid-19 pandemic that is slated to move into the endemic stage in 2022.”