Businesses stay optimistic despite cost pressures


The RAM-CTOS Business Confidence Index (BCI) survey, which was conducted from May 9-27, showed the overall index charted a positive reading at 65 in 2Q22, up from 55.4 recorded in the preceding quarter. This is above the threshold of 50, which indicates positive sentiment.

KUALA LUMPUR: Despite rising cost pressures, businesses in Malaysia remained optimistic in the second quarter of this year (2Q22), according to a survey by RAM Holdings Bhd and CTOS Data Systems Sdn Bhd.

The RAM-CTOS Business Confidence Index (BCI) survey, which was conducted from May 9-27, showed the overall index charted a positive reading at 65 in 2Q22, up from 55.4 recorded in the preceding quarter.

This is above the threshold of 50, which indicates positive sentiment.

“All other sub-indices tracked also showed positive momentum.

“It is not all smooth sailing, however, as over 80% of the 116 respondents polled are reporting rising cost pressures, which could cap business recovery,” the survey revealed.

The BCI survey noted that rising costs are a growing concern for businesses in 2Q22, cited by 83% of firms compared to 72% in 1Q22.

The share of firms citing labour issues also climbed sharply to 54% in 2Q22 from 43% previously.

Nevertheless the optimism of companies in 2Q22 pointed towards a strong recovery for businesses this year.

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However, they said most firms are facing labour shortages and escalating input costs arising from high commodity prices and supply chain disruptions.

“The imposition of a higher minimum wage and rising interest rates further compound the challenges faced, particularly by smaller firms with fewer resources,” it added.

The survey also disclosed that about 60% of respondents, the majority comprising of small and medium enterprises (SMEs) and micro firms, need more financing in the next six months to fund growth.

“These same firms reported more hurdles to secure additional external financing,” said RAM and CTOS.

At the same time, they noted that more than 40% of SMEs and micro firms confided that their financing applications were rejected in the last six months as compared to 10% for corporate respondents.

The key impediment to obtain financing was the lack of collateral, cited the surveyed firms.

RAM and CTOS urged policymakers and financial institutions to support SMEs and micro firms by facilitating access to financing and other market initiatives.

“This will ensure the nation’s economic recovery remains on track this year,” they said.

Smaller firms, the survey found, had the tendency to be more reliant on personal funds to grow their businesses.

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