Petaling Jaya: SME Bank’s SME Sentiment Index for the first half of 2024 revealed an increase in confidence among micro, small and medium enterprises compared to the previous survey in the second half of last year.

The index serves as an important economic indicator, gauging MSMEs’ view of the business environment and providing a benchmark for future overall economic performance.

SME Bank Group President/CEO, Datuk Wira Aria Putera Ismail said in a statement, “The SME Sentiment Index has seen an improvement, rising to 54.7 in the first half of 2024 from 53.5 in the second half of 2023. was.”

This positive change is mainly due to improved economic outlook, improved cash flow, and stronger liquidity buffers among MSMEs, he added.

These results reflect the optimism, resilience and adaptability of our MSMEs as they navigate Malaysia’s steady economic recovery.” He added that this upward trend resonates strongly with the government’s efforts under the Madani Economy Framework. , which aims to revitalize Malaysia’s economy by promoting inclusive and sustainable growth.

Arya Putera said the improved sentiment among MSMEs indicates their important role in this economic recovery, highlighting their ability to adapt and thrive in a dynamic business environment.

“As we continue to support MSMEs, their positive outlook will be critical in leading Malaysia to a stronger and more resilient future,” he added.

The sentiment is in line with Malaysia’s gross domestic product growth forecast of 4% to 5% for 2024, up from 3.6% in 2023, said SME Bank chief economist Lynette Lee Lee King. -In the first quarter of 2024, surpassing the 2.9% growth recorded in the previous quarter.

“Other forward-looking indicators, such as the MIER consumer sentiment index and the Department of Statistics Malaysia’s business trend statistics, also point to sustained economic expansion. However, amid a high-cost environment, profitability, employment decisions, and Challenges remain with regard to expansion initiatives,” Lee said.

Compared to the previous survey, MSMEs now have a more balanced view of the economy over the next six to 12 months. While 38% of respondents expect economic expansion (up from 33% in H2’23), the proportion expecting a slowdown has decreased to 37% (down from 54% in H2’23). This optimism is likely supported by strong domestic spending, a healthy labor market, government cash assistance, strong investment activity, and a recovery in exports and tourism.

While 53% of respondents expect higher revenues in the next six to 12 months, this is down from 66% in the previous survey, highlighting challenges such as increased competition and a high-cost environment. By sector, the highest sales expectations are in chemicals manufacturing (78%), housing (69%), and food product manufacturing (68%). Regionally, MSMEs in Sarawak (89%) and Sabah (75%) are the most optimistic, especially in the construction sector.

In line with the 12th Malaysia Plan target for MSMEs to contribute 25% to national exports by 2025, the survey introduced questions on international market exposure. Currently, only 8% of respondents export their goods and services, with the majority (92%) focused on domestic markets. Large-sized businesses in the manufacturing sector have higher export activity than micro-enterprises.

A majority of MSMEs (57%) remain neutral to changes in government policies such as targeted subsidies and regulatory requirements. The government’s phased approach to structural reforms, including progressive wage policy and rationalization of subsidies, is intended to mitigate negative impacts while promoting long-term economic stability.

In particular, the financial stability of MSMEs has improved significantly. The proportion of respondents with a cash buffer of more than a year doubled to 72%, mainly among small and medium-sized businesses. This trend is supported by rising business profits and more financial aid, especially in the ICT, real estate, and education sectors.

The survey, conducted during the first half of 2024, gathered insights from 1,295 participants from all states in Malaysia, representing various sectors and business sizes.

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