KUALA LUMPUR - Businesses in Malaysia are cautiously optimistic about the economic outlook for 2014, according to a research from Grant Thornton's International Business Report (IBR).
Results from the survey carried out in early December 2013, showed that optimism level has risen from 12 per cent a year ago to 20 per cent, an increase of 8 percentage points.
"This change in levels of business confidence feeds directly into business growth prospects," SJ Grant Thornton country managing partner Datuk N.K. Jasani said in a statement yesterday.
In Malaysia, positive business growth prospects can be seen as 52 per cent of business owners expect an increase in revenue this year. Business owners have also revealed that they expect to invest in plant and machinery, 64 per cent, the highest in ASEAN and also invest in new buildings, 28 per cent, and the second highest in ASEAN.
"Apart from the optimistic business environment, the survey also shows that there is positive labour market for the year ahead," Jasani said.
"Businesses are more confident in employment this year. About 36 per cent businesses revealed that they expect to hire more workers compared with 28 per cent last year. Besides that, 90 per cent of business owners are expecting to offer employees a pay rise and this number is also the highest in ASEAN," he added.
Business owners have also expressed that there is a decrease of lack of skilled workers - 48 per cent to 36 per cent and also a decrease in shortage of orders - 30 per cent to 20 per cent.
"Even though business growth prospects are positive, business owners are also preparing to face business impediments such as inflation for the year ahead," Jasni said. The survey revealed that business owners are setting higher selling prices 28 per cent compared with just 8 per cent last quarter. Other indications also show that business owners are expecting to offer employees an above inflation pay rise in the next 12 months, 24 per cent, compared with 18 per cent last quarter.
"The proposed increase in toll prices, and the municipal assessments in Kuala Lumpur, as well as the increase in electricity tariff rates and public transportation pose a serious challenge to businesses owners. This can be seen from the survey results, as 54 per cent business owners expressed that the rising energy and other costs are major constraints for them.
"Additionally rising costs will affect Malaysia's position as an investment choice," he said.
The survey also reveals that businesses in the ASEAN region are optimistic about the economic outlook for the year ahead. About 45 per cent of businesses are positive and this has risen from 25 per cent last year. Countries like the Philippines (72 per cent to 90 per cent) and Vietnam (-10 per cent to 40 per cent) has experienced big increases.
"We're braced for a momentum shift in the global business dynamic as we enter 2014. The BRICs (Brazil, Russia, India, China and South Africa) have largely driven global growth since the financial crisis but the G7 economies are making a comeback - things are improving in the eurozone. The contrast from 12 months ago is stark - as business leaders plan for 2014, growth prospects in the G7 look more robust but uncertainty is growing in the BRICs and across Latin America," Jasni said.
In the BRICs though, expectations for revenue growth have fallen by 27 percentage points to 54 per cent over the same period. Similarly, expectations for raising profits across the G7 were up 16 percentage points to 36 per cent in the last quarter 2013 compared with 12 months previously while BRIC peers' expectations dropped 28 percentage points to 47 per cent over the same period.
Jasni said 12 months ago, growth prospects in the G7 economies looked markedly different: Europe was in recession, the United States was teetering over the fiscal cliff and Abenomics had yet to boost Japan.
"More recently we have seen growth return to these economies as unemployment falls and consumer spending rises. Consequently businesses are seeing renewed demand for their goods and services which translates into improved short and long-term growth prospects."
The situation in the BRIC economies is more difficult. The prospect of the US Federal Reserve tapering its extensive quantitative easing programme sent emerging markets into a spin in 2013 and the signs are that this will finally happen at some point in 2014. Growth has slowed markedly in all four BRIC economies and while the outlook for China remains more stable, Brazil, India and Russia face serious economic and political challenges over the next 12 months.
"The hope is that we are moving towards a more balanced global economy with fewer extremes. This should support business growth prospects; and less volatility means businesses can plan for the future and make decisions with greater certainty."