RAM Business Confidence Index indicates sustained optimism in 2018

• Resilient optimism to support investment and hiring growth in 2018
• Room for improvement in SME business performance

BUSINESS confidence amongst corporates and Small and Medium Enterprises (SME) remains upbeat for the first and second quarter of 2018 according to the recently released RAM Business Confidence Index (RAM BCI).

Jointly conducted by RAM Holdings Bhd and RAM Credit Information Sdn Bhd, the RAM BCI surveyed the six-month outlook from 3,500 respondents from around Malaysia across different industry segments that include agriculture & mining, transport & storage, manufacturing, construction, wholesale, retail and business services.

Over the course of the one year of tracking business sentiments, the survey found generally positive readings of BCI from both corporates and SME indices, with a benchmark of 50, pointing at readings of 55.6 and 52.4 respectively.

RAM group chief executive officer Dr K Govindan said this indicates that Malaysia’s economic momentum remains on track with a moderate GDP growth anticipated this year at 5.2%, compared to 5.7% in 2017, supported by strengthening domestic demand and resilient external markets.

“This is especially so as there is greater business expansion and hiring intentions continue to stand out as the most positive aspects. Given the longer-term nature of these activities, this highlights optimism towards Malaysia’s medium-term outlook,” he said.

Govindan added that the RAM BCI has proven that it is technically strong and capable of providing reliable leading indicators on investment and employment growth, providing valuable insights for policymakers by identifying pertinent sector-specific issues, notably those faced by SMEs.

The survey noted that SMEs, unlike their corporate counterparts, maintained a slight downside in business prospects due to greater uncertainties that contrast with economies of scale, operational flexibility and bargaining power of corporate firms. This is because SMEs are constrained by limited resources and lack of scale.

“Despite facing strong headwinds in profitability and turnover, SMEs continue to innovate and seek growth. Their survivalist nature and smaller scale might work in their favour allowing them to be agile and thus remain competitive,” RAM Rating Services Bhd economist Kristina Fong noted.

Govindan said that SME agencies and regulatory authorities would need to continue to monitor their performance and increase assistance to help these firms overcome their short-term challenges and uncertainties. This includes by exposing them to international trade and understanding the regulations for trade.

He also suggested that SMEs take advantage of e-commerce as a medium to help them go to the international market.

Apart from that, the latest RAM BCI indicates that export-oriented firms are more bullish compared to their domestic-centric counterparts. This indicates signs of export growth resilience this year though at a more moderate pace compared to the recovery of early 2017.

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