Business optimism in Malaysia soars in Q2

Business optimism in Malaysia rose 24 percentage points (pp) to 52% net as at the end of the second quarter (Q2) of 2018 versus 28% in Q1 after the change in the new federal government, according to Grant Thornton International Business Report.

This near doubling in business optimism was the highest among the Asean countries.

Grant Thornton Malaysia’s country managing partner Datuk NK Jasani said the results indicated that Malaysian businesses are upbeat and confident with the outlook of country’s economic landscape.

“The outcome of the 14th General Election has contributed to this significant increase of confidence among Malaysian businesses and the results can been seen in various sectors.”

He opined that the government should now emphasize on business transparency and have business friendly budget to continue this positive momentum.

Business owners are confident about their business performances over the next year, with many having positive outlooks for revenue, employment and also investments. A net 56% of businesses are expecting an increase in revenue over the next 12 months, an increase of 22pp from Q1.

The report finds that a net 26% of businesses owners are expecting to hire more employees, an increase of 12pp from Q1.

Apart from that, business owners are expecting to increase their level of investments. 66% plan to increase their investment in technology; 44% in plant & machinery; 24% in research and development; and 22% in new buildings.

Lesser business owners have cited the economic uncertainty as a constraint to their business growth, a decrease from 44% in Q1 to 32% in Q2.

However, there is growing concern on the lack of skilled workers, energy costs and exchange rate fluctuations.

Access to skilled workers is seen as the biggest constraint to growth by Malaysian businesses at 46%, an increase of 14pp from Q1.

Concerns have also increased for exchange rate fluctuations, driven by the prospect of further US Federal Reserve rate increases this year.

Jasani said with many businesses across Asean still borrowing in US dollars, fears over rate rises could easily blow business confidence off course.

“For the emerging economies, including Asean, it is not an easy situation for businesses. However, action can be taken to reduce the risks associated with a reliance on US dollars. One option is to hedge and lock in a more predictable exchange rate for a period of time.”