KUALA LUMPUR: Small medium enterprises' (SMEs) business sentiment has nosedived to a record low of 33.2 points in the second quarter (Q2) of 2021 from 38.7 points in the preceding quarter, according to RAM Holdings Bhd (RAM)
RAM said based on its Business Confidence Index (BCI) concluded in early June, the lower index was recorded amid the reimposition of Movement Control Order (MCO) this year.
The survey, which polled some 180 firms, highlighted the plight of SMEs in trying to survive yet another round of movement restrictions and business closures in the form of MCO 3.0.
It added that an index reading of 50 and below signified pessimism in business outlook through the next six months.
RAM said firms were most pessimistic about sales (most prevalent among the "high touch" sectors of retail and business services), with about 90 per cent citing the weak economy as their main challenge.
Conversely, close to 90 per cent of manufacturing firms polled cite rising business costs as their main challenge.
"This is consistent with the recent surge in the cost of major raw materials following a commodity upcycle and a surge in global shipping costs amid supply bottlenecks, " RAM said in a statement today.
RAM said cost cutting still SMEs' main survival tactic with more than half of firms surveyed had resorted to the measure in the past year.
With the continuation of MCO 3.0, about 40 per cent believe cost cuts were necessary to remain viable.
"This is particularly true of smaller firms that already have limited cashflow. If no further assistance is extended, they could face inevitable closure in the next few months," it said.
RAM said smaller firms needed more short-term assistance, given the tough operating environment.
The survey indicated that the vast majority of firms, especially SMEs and those in high touch sectors, had voiced the need for short-term assistance.
"The continuation of wage subsidies and loan moratoriums - both of which are available under PEMERKASA+ - are reliefs firms need the most, at 36 per cent and 17 per cent of surveyed firms, respectively.
"Another 15 per cent of firms also needed additional loans to stay afloat. Over and above moratoriums, banks may need to extend additional lending to tie over firms' cashflows until the economy recovers."
RAM said over 80 per cent of survey respondents envisioned business recovery within a year, but to below pre-pandemic levels.
"While we applaud the various assistance measures for businesses and SMEs, we urge policymakers to extend immediate assistance to the more vulnerable entities in the services and retail sectors," it added.
Source: https://www.nst.com.my/business/2021/06/702961/malaysian-sme-confidence-plunges-new-low-says-ram