Steady Economic Recovery in Malaysia’s 3rd Quarter Boosts Confidence in Businesses
According to MIER, it’s going to be a slow but steady trek for Malaysia on the winding sustained road to economic recovery.
The Malaysian Institute of Economic Research (MIER) recently published the findings from its Business Conditions Survey Report. Malaysia’s second-quarter (Q2) of 2020 did not perform that well and saw a significant drop of 22.0 points. According to the current report, Malaysia’s third-quarter (3Q) of 2020 is performing better and showing steady signs of economic recovery.
It recorded a rise of 25.3 points on the Business Conditions Index (BCI). This has brought the BCI right up to 86.3 points. Compared to last year’s -39.7 points, this is seen as favourable because it features an expansion rate of +17.2 points. This recovery is nevertheless reflective of rising confidence from manufacturers.
Drawing relative parallels to the previous quarter, the MIER report iterated that there was a substantial improvement in most of the BCI components. This overall improvement was attributed to sales arising from both domestic and export demand.
Further positive outcomes included increased capacity utilization and production, as well as marginal rises in capital investment. The report ascribed this to the possibility of better forecasts of business conditions in the foreseeable future.
However, MIER stated that the index was still below the threshold level. This trend has been consistent for the past seven consecutive quarters, the result of which has been to foster cautious business outlooks.
Nevertheless, it does not detract from creating a more positive note in business conditions. The Malaysian Government’s financial care package has undoubtedly had a constructive benefit. It has acted as an active intervention reflective of Malaysia’s ability to recover from the global COVID-19 pandemic. MIER cited programs such as Prihatin Rakyat Economic Stimulus Package (PRIHATIN) and the National Economic Recovery Plan (Penjana) as examples.
The report went on to note that the Expected Index (EI) has also increased by 15.2 points. This upward movement has positioned it at 99.7 points and contributed to expectations of a more positive outlook in the next quarter. The progressive growth was credited to mostly encouraging perspectives as compared to the previous quarter. The basis for it lies in expectations of production volume, employment, as well as domestic and export sales.
More Positive Forecast of the Next Quarter
Generally, these optimistic factors have pushed towards a more positive forecast of the next quarter. This optimism is built upon manufacturers’ confidence in an economic recovery. MIER ascribed the basis of this confidence to two factors as compared to Q2. These comprise a 13.1-point rise in the expected production rates and a 2.1-point rise in the expected export sales respectively. Collectively, they demonstrated that manufacturers continued to believe in brighter prospects for the future.
The fourth quarter of 2020 is expected to have a more conducive outlook with regard to business conditions and economic recovery. Approximately 60% of manufacturers are expected to retain their existing labour force, while 51% will maintain the current domestic selling prices.