Malaysian businesses expect pandemic to have deeper impact on economy, says EY

General consensus by Malaysian respondents seems to indicate that there is an imminent risk of a recession

by BERNAMA/ pic credit: www.ey.com

MALAYSIAN businesses anticipate the Covid-19 will have a prolonged and deeper impact on the economy and will likely consider strategic mergers and acquisitions (M&As) to accelerate growth.

In a statement, Ernst & Young LLP (EY) said its 22nd edition of the EY Global Capital Confidence Barometer (CCB22) highlighted 62% of its Malaysian respondents expect a U-shaped recovery period of slower economic activity extending into 2021.

It also said 38% see a V-shaped recovery and a return to normal economic activity in the third quarter this year and less than 1% foresees an L-shaped recovery and recessionary conditions until 2022. EY Malaysia Transaction Advisory Services leader George Koshy (picture) said the pandemic has accelerated economic slowdown and created business disruption coupled with a liquidity crunch.

“The general consensus by the Malaysia respondents seems to indicate that there is an imminent risk of a recession, the magnitude of which is anticipated to be large with a prolonged U-shaped recovery.

“Across all sectors, companies will need to transform, reboot and reshape themselves, which will give rise to both opportunistic and strategic M&As in the post-Covid-19 era,” he added.

According to the CCB22, executives might be bolder in their ambitions and look to acquire those assets that would accelerate into an upturn faster, should there be any prolonged downturn due to the current crisis.

Even with the decline in market sentiment, 47% of the Malaysia respondents said that they intend to pursue M&A transactions in the next 12 months, which was higher than the Malaysia Capital Confidence Barometer average of 44% since 2010.

“Looking beyond the crisis, many companies will be turning to M&A to take advantage of lower valuations and the rise in distressed assets coming into the market and to advance their transformation agenda.

“Although some dark clouds remain, Malaysian companies have reasons to be cautiously optimistic about addressing today’s challenges, planning for the next and thinking beyond,” EY added.