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Wednesday, 11 January 2017

(The Star) Businesses optimistic about economy in first half

Corporates show slightly higher positive outlook compared to SMEs
KUALA LUMPUR: Corporates and small and medium enterprises (SMEs) are optimistic about economic performance and business outlook for the first half of 2017, a business confidence survey by RAM Holdings Bhd show.
Corporates displayed a slightly higher positive outlook, with an index of 56.9, as compared to SMEs, which recorded a score of 53.2.
The stronger outlook for corporates was attributed to the expected pick-up in trade activities on the back of a US recovery and sustained demand from China.
RAM Ratings Research Unit head of research Kristina Fong said the manufacturing sector, a key sector of the economy, recorded a notable positive sentiment of 56.5.
“This suggests that firms are anticipating a recovery in external demand along with continuing support provided by domestic demand in 2017.
“Likewise, the construction sector remains positive due to ongoing infrastructure work while the wholesale sector was slightly less optimistic, given the slowdown in retail domestic demand on account of the increasing cost of living and soft labour conditions earlier in 2016,” she said.
The RAM Business Confidence Index measures positive and negative sentiment of firms on their six-month forward looking expectations on key aspects which include turnover, profitability, hiring, capital investment, capacity utilisation and access to bank financing.
An index of above 50 indicates positive sentiment while less than 50 indicates negative sentiment.
Despite positive sentiment on turnover and profitability in the first half of 2017, the survey’s findings suggest that SMEs exercised some degree of caution and risk aversion.
SMEs were also found to be less bullish about business expansion and capital investment during the same period.
Fong added that the nation’s gross domestic product (GDP) growth is expected to be at 4.5% this year, as compared with last year’s growth of 4.2%.
“We actually see some indications of normalisation or stabilisation of macro indicators this year.
“Better labour conditions and wage growth contribute to the normalisation of domestic demand, backing up improvements in growth prospects for this year.
“Trade indicators point towards some stabilisation in external demand as well,” she said.
Apart from that, Fong expects electrical and electronic exports to strengthen this year in accordance to a pick-up in technology cycles.
This will be driven by Malaysia’s competitive advantage in the export of electrical and electronic products.
As for the ringgit, Fong presumes the currency to hover within the range of RM4.00 to RM4.50 to the US dollar, due to the volatility and uncertainties in the year.
More volatility and downward pressure is expected in the first half of the year, followed by a slight improvement in the second half of the year.
RAM Holdings group CEO and executive director Datuk Seri Dr K. Govindan said the overall business confidence indices for both corporates and SMEs indicate healthy economic prospects over the next six months.
“Having surveyed nearly 3,000 SMEs and corporates, the RAM Business Confidence Index is the most comprehensive survey of business sentiments in Malaysia,” he said.
The 801 corporates surveyed were from sectors such as manufacturing, construction, wholesale, agriculture and mining, as well as transport and storage.
Meanwhile, 2,073 SMEs surveyed were from retail, business services, construction, transport and storage, as well as manufacturing sectors.
The jointly conducted survey by RAM Holdings and RAM Credit Information Sdn Bhd was concluded in November 2016.

From the 801 corporates surveyed, 62.5% were found to be profitable despite the current challenging economic conditions, while 79.3% of the 2,073 SMEs were profitable.