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 promising road to economic recovery.
The Malaysian Institute of Economic Research (MIER) recently published the findings from its Business Conditions Survey Report. While Malaysia’s second-quarter (Q2) of 2020 saw a significant drop of 22.0 points, records have shown that the third-quarter (3Q) of 2020 is performing at a better rate with steady signs of economic recovery.
Q3 recorded a small rise of 25.3 points on the Business Conditions Index (BCI), bringing the index right up to 86.3 points. Compared to last year’s performance of -39.7 points, this is seen as a favourable increase as it features an expansion rate of +17.2 points. This recovery, while considered modest, is nevertheless reflective of the rising confidence from manufacturers.
In comparison to the previous quarter, the MIER report iterated that there was a substantial improvement in most of the BCI components. This overall betterment 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 which has been consistent for the past seven consecutive quarters resulted in fostering cautious business outlooks.
Nevertheless, it does not detract from creating a slightly more positive note in business conditions. The Malaysian Government’s Financial Care Package, which consisted of programs such as Prihatin Rakyat Economic Stimulus Package (PRIHATIN) and the National Economic Recovery Plan (Penjana), has constructed multiple benefits for the country. These initiatives have acted as an active intervention, which reflected Malaysia’s ability to recover from the impacts of the COVID-19 pandemic.
MIER’s report noted that the Expected Index (EI) has also increased by 15.2 points. This upward movement has positioned the index 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 positive outlook to the 13.1-point rise in the expected production rates and a 2.1-point rise in the expected export sales. Collectively, the figures boosted the manufacturers’ conviction towards brighter prospects for the future.
The fourth quarter of 2020 is expected to have a more conducive outlook for Malaysia’s 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.