Malaysian businesses are less optimistic – Government boost needed.

Press Release

Malaysian businesses are less optimistic – Government boost needed.

05 Mar 2015

The IBR shows that global optimism has dropped from 43% to 35% (Q3 to Q4). The optimism level in the ASEAN region has also dropped from 56% to 23% (Q3 to Q4)

05 January 2015 

Kuala Lumpur: New research from the Grant Thornton International Business Report (IBR) reveals that while business confidence climbed to levels not seen since before the financial crisis, a recent spate of uncertainty is weighing on growth prospects for the year ahead. 

The IBR shows that global optimism has dropped from 43% to 35% (Q3 to Q4). The optimism level in the ASEAN region has also dropped from 56% to 23% (Q3 to Q4). 

In Malaysia, only 14% of business owners are optimistic for Malaysia's economy outlook for the year ahead as compared to 50% in Q3. Our neighbouring countries have also revealed lower levels of optimism from Q3 to Q4: Singapore – 66% to 48%, Indonesia – 48% to 14%, Thailand – 71% to 27%. 

Dato NK Jasani, Country Managing Partner of SJ Grant Thornton commented, "Business confidence is a key indicator of future economic performance. The large rise in global optimism in 2014 came as a pleasant surprise after a couple of tough years but the dip in the last three months suggests that businesses around the globe see trouble on the horizon in 2015."

Effects of oil price drop

There are a number of potential flashpoints which are threatening global economic stability. The volatility in the oil price is of particular concern to global markets: prices have dropped to five-year lows in December and while cheaper oil will benefit net importers and industries such as manufacturing and transport, it is already spelling trouble for energy companies and key markets such as Russia and the Middle East. 

This uncertainty is weighing heavily on business growth prospects. Both revenue growth - down 13pp (from 56% to 43%) - and profit growth - down 11pp (from 43% to 32%) - prospects have both fallen globally from Q3 to Q4. In the ASEAN region, both revenue growth - down 32pp (from 68% to 36%) – and profit growth down from 46% to 22% from Q3 to Q4.

Changing scene in Malaysia

In Malaysia, the numbers of businesses expecting revenue to rise have dropped 18pp over the quarter, 54% to 36% (Q3 to Q4). Businesses expecting profit to rise has also dropped 28pp, 40% to 12% (Q3 to Q4). 

The IBR has also revealed that lesser businesses owners are expecting to employ more staff. The same dropped from 44% to 32% during the 4th quarter of 2014. 

The prevailing uncertainty is making life tough for businesses, forcing them to delay decisions over investment in the future growth of their operations. Given the turbulent state of global markets, this is understandable. They remain positive about their expansion prospects but certainly less so than three months ago.

Due to the uncertainties, businesses in Malaysia are thinking about growth initiatives to implement during the next 12 months. Business owners revealed that they are most likely to improve sales force effectiveness (62%), expand business overseas (40%), and expand business domestically (34%).

"The sales force is one of the most effective channels for businesses to engage with their customers. Business owners are rethinking about their sales strategies, sales processes, reward plans, training and many more so that their businesses will improve."

Flood calamity & air tragedies

"Our Grant Thornton global survey was carried out on an independent and professional basis by Experian around October 2014. Since then for Malaysia the big flooding calamity affecting a number of states particularly Kelantan has occurred." 

"Additionally there has been dampening of confidence due to the three air tragedies. The business community has also expressed deep concern on the implementation of the Goods and Services Tax (GST)." 

"The actual business optimism may now be even much weaker than when surveyed around October last year." 

Deferral of GST

"The Malaysian Government should therefore consider measures and effective actions to build up the sagging business confidence. The Government should also seriously deliberate on delaying the implementation of GST from 1st April to perhaps 1st July. This will alleviate one major over-hanging worry for the business community and the people. The breather of time will help business confidence and also enhance the deferred implementation and compliance," stated Dato' Jasani.

Dato' Jasani concluded that, "The level of business confidence will translate into business activity, employment and job creation." 

For more information please contact:

Sharon Sung, Technical and Corporate Affairs Partner, T  +60 3 2692 4022, 

E sharon.sung@my.gt.com

Charmane Koh, Corporate Affairs Assistant Manager, T  +60 3 2692 4022, 

E charmane.koh@my.gt.com