PETALING JAYA: RAM Holdings Bhd says micro enterprises, and small and medium enterprises (SME) were hampered by higher cost pressures and labour issues in the third quarter of 2022.
The rating agency said its RAM-CTOS business confidence index (BCI) declined to 51.4 from 65 in the preceding quarter as a result and more than 80% of the 152 firms surveyed identified rising costs as the main factor clouding business sentiments.
“These costs, initially thought to be transitory, are unlikely to abate anytime soon, putting businesses under greater pressure. The margin pressure is particularly pronounced among the smaller firms surveyed that voiced broadly weaker sentiments,” the agency stated in statement yesterday.
The firms however remained optimistic about the outlook for sales amid strong demand recovery.
Shortage of labour was cited by 53% of the companies polled as another headwind, with the profitability sub-index at 46, which indicated negative prospects of the companies’ future profits.
New order flows however saw the sub-index for revenue outlook almost reach 56, which entailed a healthy volume of business for companies.
Not all the surveyed firms chose to increase prices in order to keep their businesses afloat. Nearly 60% of companies raised their prices, while 35% have not done so.
Among the micro enterprises, about 80% chose to keep their prices unchanged.
“The main reason cited was the fear of losing customers, while some opted to accept lower profit margins,” RAM said.
Some firms may need to implement further price hikes in the next six months, if they are to remain viable, the survey found.
As the economy reopens, businesses continue to be optimistic regarding sales growth going forward.
In view of the present challenges, especially for micro enterprises and SMEs, the rating agency advised policymakers to offer support in terms of cutting out red tape, as well as guidance to access market initiatives and support that are available.
“The support afforded will allow these firms to capitalise on strong incoming orders and ensure that the nation’s economic recovery remains on a sustainable path,” the agency said.