Businesses remain wary of recovery this year

Sales prospects expected to remain weak in 1H21 with 48.8% of respondents expecting a decline in sales volume

by AZREEN HANI / pic by AFP

MOST businesses remain wary of economic conditions in the first half of the year (1H21) due to the new wave of Covid-19 and movement restrictions, according to Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) Malaysia’s Business and Economic Conditions Survey (M-BECS).

Based on M-BECS, only 23% of respondents are confident of economic recovery in 2021 (against previous survey which had 84.9% of respondents expecting the recovery to take place by 2021), while 38.7% of respondents have no confidence and 38.3% are unsure of economic recovery.

In contrast, a large number of respondents in medium enterprises (60.2%) and large enterprises (53.6%) forecast better economic prospects in 2022. Less than half of the micro-enterprises (39.8%) and small enterprises (41.2%) have optimistic views. The sentiment is largely on the prospect of the nation’s vaccination programme.

The survey found that more than 50% of respondents in the tourism-related sectors are unlikely to survive if the Conditional Movement Control Order (CMCO) or Enhanced MCO is still enforced for more than two months.

It revealed that most businesses are still reeling from the prolonged impact of the pandemic in 2H20, with disproportionate impact between economic sectors and size of business operations.

“ACCCIM hopes the government at all levels will continue to facilitate the economic recovery and business sustainability. Businesses need meaningful not piece-meal plans,” the chambers said in the statement.

“As there remain challenges amid the ongoing vaccination programme, businesses should not be overburdened with regulatory compliance under the healing process.

“Hence, ACCCIM sees the need for continued credit and loans facilities; easing of burdensome regulatory and compliance costs; and the enhanced provision of tax incentives such as reinvestment allowance, accelerated capital allowance and market development grant,” it added.

The survey was conducted from Nov 16, 2020, to Feb 15, 2021, cover- ing 2H20 and expectations for 1H21 with 696 respondents.

Overall, 44% of total respondents have experienced worse business conditions in 2H20 though the per-centage share reduced by 34.2 per- centage points from 78.2% in 1H20.

Some 26.9% of respondents experienced better business conditions in 2H20.

Additionally, M-BECS found that top five factors that have impacted the performance of businesses in 2H20 are higher operating costs and cashflow problem (as ranked by 48.3% of total respondents); declining business and consumer sentiment (47.6%); political climate (46.1%); lower domestic demand (41.2%); as well as unclear commu- nication and inconsistent interpre- tation of the enforcement of stan- dard operating procedures (39.8%).

Some 74.4% respondents cited three Cs — cost, credit and cash- flow — as their top concern under the prolonged impact of the pandemic, which has caused different magnitudes of demand retrenchment and supply disruptions, as well as movement restrictions.

Worse, 80.7% of respondents indicated that their current cash- flow level is unable to cover business operations/productions, raw materials/inventory and manpower for more than six months.

More than half or 53.5% of respondents experienced a decrease in overall sales volume in 2H20, with 21.3% reporting a decrease of more than 30% (17.9% for a decrease of 16%-30%; 14.2% for a decrease of 1%-15%).

The sales prospects are expected to remain weak in 1H21 with 48.8% of respondents expecting a decline in sales volume.

More than 60% of respondents reported that both prices of local and imported raw materials have increased significantly in 2H20.

Some 32.3% and 40.6% of respondents have experienced an increase of more than 10% in prices of local and imported raw materials respectively in 2H20.

The costs of both local and imported raw materials are expected to remain elevated in 1H21.

Read our previous report here

74% M’sian businesses are projecting growth in the near, mid-term future