Riding on the back of strong domestic consumption and investments, the Malaysian economy is set to take off, laying promise for firms this quarter and the rest of the year. Despite a slowdown in the global economy which led to a moderation in external demand and persistent downside risks, Malaysian businesses remain upbeat about local market conditions. According to Dun & Bradstreet (D&B) Malaysia’s first quarterly Business Optimism Index (BOI) barometer, positive sentiments are affirmed with all 6 leading business indicators in the expansionary region. The 6 critical business indicators under study include volume of sales, net profits, selling price, inventory levels, employees and new orders.
For the second quarter, volume of sales and net profits posted the highest net optimism levels at 50.5 percentage points and 49.6 percentage points respectively. According to D&B Malaysia, both volume of sales and net profits are expected to increase by more than twice the actual optimism level in Q1. Hiring expectations are also off to a strong positive start as employment is likely to increase to 34.6 percentage points. Meanwhile, selling price and inventory levels are expected to experience modest increases at 14 percentage points and 10.8 percentage points respectively. New orders for the manufacturing sector registered a net optimism of 40 percentage points, a four-fold increase from the actual optimism level in the first quarter.
Of the 6 sectors, wholesale, services and financial sectors have emerged as three leading industry verticals from the quarterly study. Volume of sales and net profits for the wholesale sector are expected to increase sharply to 85 percentage points and 60 percentage points respectively, a two-fold increase from the actual optimism level reported for the first quarter.
Following Bank Negara’s recent initiatives to strengthen the financial sector, firms within the sector have anticipated an increase in their hiring levels for the second quarter. The financial sector reported the largest increase as optimism levels for employment registers 42.9 percentage points. Meanwhile, the services sector has remained buoyant as the government announces its plan to liberalise sub-sectors covering transport, tourism, healthcare and logistics by early 2014. According to the quarterly study, the sector is likely to experience a substantial increase in volume of sales at 60.6 percentage points and stronger hiring at 42.4 percentage points.
“The positive expectation is a testament to the Malaysian government’s efforts to realise the country’s ambition to be a high-income nation through its Economic Transformation Programme (ETP) by the year 2020. For the second quarter, we have seen greater levels of business confidence, especially in volume of sales, net profits and employment. It remains to be seen whether a brighter outlook will continue to take hold as the nation prepares for what may prove to be a watershed election in the coming weeks.” said Mr. Eugene Zachariah, D&B Malaysia’s Marcom & Product Manager.
The overall strong showing reflects governmental speculations that the economy could achieve 4.5% to 5.5% growth in 2013. According to a recent report by the International Monetary Fund (IMF), companies are expected to increase their hiring as the implementation of reforms to boost the quality of education and to reduce skills gaps will ultimately contribute to economic growth. In Q4 2012, Malaysia’s economy grew 6.4% due to steady D&B 2/4 domestic demand. It is projected that the private sector demand will remain robust and be the main driver for the rest of 2013.