KUALA LUMPUR (April 9): Malaysia's business sentiments on future prospects have improved in the first quarter this year (1Q2024) following two consecutive quarters of deterioration, according to the RAM-CTOS Business Confidence Index (BCI) survey.

The overall BCI index rose to 53.4 in 1Q2024, from 48.9 in 4Q2023, above the neutral level of 50 delineating positive and negative sentiments, according to RAM and CTOS’ joint statement on Tuesday.

The survey found that the upturn in sentiments was observed across all five surveyed aspects of doing business, and respondents were sanguine about higher sales, capital investments and hiring prospects, but the still-elevated cost pressures inhibited their profitability expectations.

RAM Holdings Bhd group chief executive officer and executive director Chris Lee said the latest BCI readings coincide with the recent uptick in macroeconomic and trade data, signalling that the Malaysian economy is poised for higher growth this year.

“This aligns with RAM’s 2024 GDP (gross domestic product) growth projection of 4.5%-5.5%, an acceleration after a relatively weak 3.7% last year,” he said.

CTOS Digital Bhd’s group CEO Erick Hamburger said that while the latest BCI reflects an upturn, it is crucial for companies to leverage this positive sentiment wisely to navigate the challenges ahead, particularly concerning profitability outlook amid rising costs.

“Embracing credit management best practices becomes paramount in harnessing these opportunities effectively. By prioritising prudent credit assessments and fostering healthy financial relationships, SMEs (small and medium enterprises) can fortify their positions in the market and capitalise on the emerging economic upswing,” he said.

The survey found that rising cost of doing business continued to top the list of challenges for the ninth consecutive survey and was cited even more widely than in the last quarter.

Among the 115 firms polled in this survey, around 90% cited rising costs as their top challenge in the next three months.

Growing competition, which is the other top challenge cited by over 60% of firms surveyed, could also limit their ability to fully pass on costs, thereby crimping profitability despite higher sales prospects, according to the survey.

In this survey’s thematic query on where firms turn to for assistance, around 50% of respondents — mainly SMEs — rely on their trade or business associations.

The survey found that these organisations provide firms with an efficient and critical support network within their trade segments.

Government agencies such as SME Corp Malaysia, Bumiputera Agenda Leadership Unit (Teraju) and Malaysia External Trade Development Corporation (Matrade) are found to be relatively popular, cited by about a quarter of surveyed firms.

These agencies support SMEs through various initiatives such as grants, training and business programmes.

However, their outreach could be enhanced, as the survey found that some respondents (28%, primarily SMEs) are unaware of such assistance.

Of the firms that have benefited from government programmes, training and development as well as workshops were the most popular among respondents, particularly SMEs.

This suggests continuous upskilling remains important as firms move up the value chain, according to the survey.

It also found that micro firms appreciate business advisory services more.

“This segment, comprising mostly individual entrepreneurs who are most at risk from rising cost pressures, would likely require ongoing government assistance provided under the various schemes and subsidy programmes,” the survey showed.