Weak business sentiment a cause for concern: MIER

KUALA LUMPUR: Low business confidence is a concern for future economic growth.  Hence, many thinkers reckon that it is important for the government to remove uncertainties through economic policies which are capable of shaping the overall business environment in the country.

For Malaysian Institute of Economic Research (MIER) Executive Director Professor Dr Zakariah Abdul Rashid, the government needed to bring back the good sentiment by showing supportive efforts to businesses in confronting the current situation.

Similarly, the government should try to contain political issues that are affecting the business environment, he told Bernama.

While Zakariah expects growth prospect for 2019 to improve from 4.7 per cent target set for 2018, the current condition he said, would be influenced significantly by uncertainties surrounding the US-China trade war, volatile oil prices and Brexit.

“Internally, I would agree about the lack of supportive policy to mitigate external issues, which are dominating the the sentiment and business conditions.

 “A survey conducted by MIER in the third quarter 2018 showed the Consumer Sentiments Index (CSI) had slipped to 107.5 from its 21-year high of 132.9 recorded in the second quarter 2018. “As I mentioned earlier, expecting internal economic policy to overturn the situation is rather unrealistic. “

“Furthermore, the internal political situation is still unstable as the new government just took over the administration a few months ago from a coalition party which had ruled the country since Merdeka.

“At the same time, equity market performance and the November trade data released by the Department of Statistics Malaysia are also unfavourable,” explained Zakariah.

Having said that, the long term structural issues affecting economic fundamentals should not be traded off.

A survey conducted by MIER in the third quarter 2018 showed the Consumer Sentiments Index (CSI) had slipped to 107.5 from its 21-year high of 132.9 recorded in the second quarter 2018.

As for the Business Conditions Index (BCI), it had weakened to 108.8 from 116.3, attributed to factors such as deceleration in production and less active investment spending.

During the quarter, consumers were still positively optimistic, pertaining to their current incomes, expected incomes and employment outlook

Businesses were also optimistic about the current business environment, supported by new sales, domestic orders and export.

However, the latest survey by RAM Holdings Bhd and RAM Credit Information Sdn Bhd for the first half of 2019 had indicated greater concerns over the weak economic landscape.

This, according to RAM, has dragged down optimism among the corporates and Small and Medium Enterprises (SMEs) to the lowest level since the inception of RAM Business Confidence Index (RAM BCI) survey two years ago.

The Corporate and SME Indices for the first quarter (Q1) — second quarter (Q2) 2019 have dropped to 55.1 and 51.0 from 55.7 and 53.5 in Q4 2018— Q1 2019, respectively.

RAM said although the index value surpassed 50.0 still denote positive sentiment, the current downtrend had suggested that businesses have a less upbeat outlook for 2019. 

Following this, the number of firms citing weak economic conditions as their main challenges have spiked up to 41 per cent (Corporate) and 41.2 per cent (SMEs), followed by rising cost of doing business and increased competition. – Bernama

“Decelerating domestic growth, uncertain global demand and investment activities, as well as lack of positive catalysts, including the relatively neutral 2019 Budget, all play a part in the generally weaker business sentiment in the next six months,” RAM said.

With all these weaker prospects, firms were also holding back on capacity building, it said.

Meanwhile, Asean Traders Association (Perda-Asean) President Datuk Moehamad Izat Emir expressed hope that Prime Minister Tun Dr Mahathir Mohamad would meet with associations representing the business community and share his plan for the future.

“There are too many negative headlines from overseas and the uncertainties are bad for businesses, making it hard for us to choose a direction.

“Hence, I think its timely for Tun Mahathir, Finance Minister Lim Guan Eng and Economic Affairs Minister Datuk Seri Mohamed Azmin Ali to explain the planning being done that we don’t know,” he said to Bernama.