Malaysian businesses believe conditions are ‘deteriorating’

• Business confidence plummets in Q3; signs of recovery go into reverse
• Approval ratings for Govt economic policies at lowest for quite some time

THE post-election boost to business confidence has vanished in Malaysia as only 13% of businesses report confidence gains in the third quarter of the year, according to new findings from the ACCA (Association of Chartered Certified Accountants) and the Institute of Management Accountants (IMA) in their Global Economic Conditions Survey (GECS).
 
GECS, the largest regular economic survey of accountants in the world, gauging the views of ACCA and IMA finance professionals globally, revealed that business perceptions of the economy have deteriorated in the third quarter (Q3).
 
This is the 19th edition of GECS. It had 2,021 responses in the third quarter of 2013. Malaysia’s 13th general election (GE13) was held in May.
 
Some 65% of respondents now believe that conditions are deteriorating or stagnating, up from 55% in Q2. Only 13% reported confidence gains, down from 28% in the previous quarter, the ACCA said in a statement.
 
“This is a second quarter of tightening conditions for our members in Malaysia,” said ACCA senior economic analyst Emmanouil Schizas.
 
“Confidence in the economy and business’ own prospects has fallen back to pre-election levels and it isn’t hard to see why.
 
“After stabilising throughout the first half of 2013, pressures on demand and cash-flow have risen once again; a surge in perceived business opportunities around the election has now died down, and with it the temporary increase in capital available for investment,” he added.
 
ACCA Malaysia head Jennifer Lopez (pic) said: “Finance professionals are seeing first-hand the renewed challenges facing Malaysia’s businesses.
 
“Based on feedback received from respondents in Malaysia, it appears that business investment in capital and staff has fallen for a second quarter, while inflation and foreign exchange volatility have increased for the third quarter in a row, putting importers under a lot of pressure.
 
“A deepening credit crunch in China could have implications for Asia-Pacific in general,” she added.
 
Lopez said that set in the context of the broader region, Malaysia is suffering some of the fallout from investors’ withdrawal from emerging markets, but other problems are home-grown.
 
“The post-election honeymoon period has ended and that is reflected in the approval ratings we found for the Government’s economic policies, which are at their lowest for quite some time, with 63% disapproving, up from 51% in Q2 2013.
 
“On the other hand, fears of public spending spiralling out of control appear to have died down,” she said. “Whether this drop in perceived confidence is in for the long haul will be clearer when we look at GECS Q4 results for Malaysia.”
 
Global outlook 
 
Collectively, across the world businesses were more optimistic about the economy than they've ever been since the survey was launched, and more confident about their own prospects than at any time since the end of 2010, the ACCA said.
 
However, a closer look at the figures reveals that many individual markets did not share this buoyant mood and saw business confidence fall in Q3.
 
The threat of the US Federal Reserve and other central banks halting or reversing their extraordinary stimulus has led to a dramatic withdrawal of investment from riskier assets, as well as most emerging markets, the ACCA said.
 
The survey findings suggest that the fallout has fed through to the real economy, sending many of the world’s most promising economies into a credit crunch of their own. This timing is particularly unfortunate as it coincides with a deep credit crunch in China, resulting from concerns about the health of the country’s banking sector and the viability of its public finances.
 
“What GECS shows us is that monetary policy, real and potential, has now become a stronger influence on business confidence than demand or business opportunities,” said Schizas.
 
“That's a sure sign of trouble brewing. The idea of a global recovery has taken hold worldwide and the business community is generally optimistic about macro-economic developments even as they doubt the prospects of their own organisations.
 
“This is not really sustainable – and it is more likely that recovery expectations are going to re-align themselves with that low business confidence, than vice versa,” he added.
 
To download a PDF of the full Global Economic Conditions Survey Q3 report, click here.
 
The ACCA is the global body for professional accountants with 162,000 members and 426,000 students in 173 countries worldwide.
 
The IMA, the association of accountants and financial professionals in business, has a global network of more than 65,000 members in 120 countries and 200 local chapter communities.
 
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