ACCCIM warns of challenging domestic business and economy in 2H19

Businesses in Malaysia remain cautious due to slowing global economy and prolonged US-China trade tensions

by SHAHEERA AZNAM SHAH/ pic by TMR FILE

THE local Chinese business community is wary of the domestic economic condition’s prospects for the second half of 2019 (2H19) due to the slowing global growth and protracted trade tensions between the US and China.

According to the Malaysia’s Business and Economic Conditions Survey Report for 1H19 and 2H19, one-third of the 924 respondents cited pessimistic views on Malaysia’s business sentiment for the remaining of the year.

Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) Socio-Economic Research Centre Sdn Bhd ED Lee Heng Gui (second from left) said local businesses are of the view that the domestic business and economy will be challenging this year.

“Reflecting the slowing global economy and a prolonged trade tension (between the US and China), as well as the softening domestic economic growth, businesses in Malaysia remain cautious about the economy in 2H19.

“Malaysia’s economic growth had slowed to 4.5% in the first quarter of 2019 (1Q19) from 4.7% in 4Q18, dampened by weak exports and slower domestic demand, particularly for the private investment,” he said at a media conference in Kuala Lumpur yesterday.

About 53% of the respondents remained neutral about the economic outlook for this year, while 33% expressed a pessimistic view — 3.4% higher than the previous survey.

According to the report, the real estate and trading industries recorded the highest level of pessimism from the local Chinese businesses.

Lee said the real estate sector is dragged by the property glut, particularly in the residential sector, although the trade diversion from US-China tensions provides a temporary relief.

“From the imports and exports perspective, Malaysia may be benefitting from the trade diversion. But if we look at our export year-to-date, it has been declining and was uneven for the last three months.

“The global trade in 1Q19 also declined, suggesting the short-term diversion impact is short-lived.

“On the real estate, the concern we have is property overhang as we see the construction sector having a sharp slowdown,” Lee added.

The report stated that domestic competition, government policies and lower domestic demand remain significant factors that are affecting the local business performance.

Nonetheless, the businesses anticipate an improved economic condition beginning 2020 as a global forecast for next year advances and the US-China tensions continue to provide diversion opportunities.

“The global growth projected by the International Monetary Fund for 2020 is an improvement from the projected 3.2% for 2019.

“The trade negotiations between the US and China are hoped to give a deal, although it may not be a full deal, to improve the global sentiment and instil confidence in the trading, financial and stock markets,” Lee said.

Amid the prudent sentiment, Lee said local businesses are likely to invest their capital expenditure (capex) in 2H19 as a result of refunds from the Goods and Services Tax (GST) and income tax.

“From the survey, businesses are willing to increase their capex, partly due to the GST and income tax refunds.

“It was consistent with the previous survey where they mulled setting aside 10% to 20% of the refund for capex,” he said.

According to the survey, 58% of the total respondents have increased their capex, while the rest are expecting to invest in 2H19.

Sector-wise, businesses in the transportation, forwarding and warehousing sector were the largest group to have reported an increase in capex in 1H19, in addition to the wholesale and trading sectors.