RAM-CTOS: Business sentiment positive in 2Q22, but concerns over rising cost

KUALA LUMPUR: Businesses are firmly optimistic about their three-month outlook, according to RAM-CTOS Business Confidence Index (BCI) survey for the second quarter (Q2) 2022.

“The overall index clocked in at 65.0, up from 55.4 recorded in the preceding quarter and is well above the threshold of 50 which indicates positive sentiment,” it said in a statement.

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,” RAM said.

The RAM-CTOS BCI is a comprehensive survey jointly conducted by RAM and CTOS. The was conducted from 9-27 May, 2022.

According to the survey, the rising cost of doing business remains the top hurdle this quarter, cited by 83% of firms, up from 72% in 1Q22.

The share of firms citing labour issues also climbed sharply to 54% in 2Q 2022 from 43% previously.

“These challenges are particularly pronounced among manufacturing firms amid current spiralling input prices, supply chain disruptions and the prolonged foreign labour squeeze in Malaysia,” it said.

The survey also noted about 60% of respondents - the majority comprising SMEs and micro firms - cited a need for more financing in the next six months to fund growth.

These same firms reported more hurdles to secure additional external financing. More than 40% of SMEs and micro firms have had their financing applications rejected in the last six months, compared to just 10% for corporate respondents.

It is, however, noteworthy that over 90% and 60% respectively of corporate and SME respondents have successfully raised funds from banks and other sources in the last six months.

The firm optimism observed this quarter points toward a strong business recovery this year.

However, most firms face labour shortages and escalating input costs from high commodity prices and supply chain disruptions.

The imposition of a higher minimum wage and rising interest rates further compound the challenges faced by smaller firms with fewer resources.

The survey also noted that against these headwinds, policymakers and financial institutions are urged to continue 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.

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