Malaysian business sentiments hit record low in 2Q amid COVID-19 outbreak

KUALA LUMPUR (March 24): Business sentiment among Malaysian companies dived to a new low in the second quarter of 2020 (2Q20), sinking into the contractionary zone of -21.52 percentage points, from +10.22 percentage points in 1Q20, according to Dun & Bradstreet (D&B) Malaysia’s latest Business Optimism Index (BOI) study.

The last time Malaysia’s business optimism recorded negative was the fourth quarter of 2015.

Dun & Bradstreet (Malaysia) Sdn Bhd chief executive officer Audrey Chia said sentiments among Malaysian firms have plunged to a new low due largely to the recent surge in COVID-19 cases.

“We expect the dampened outlook to persist into the second and third quarter of 2020 given that a potential near-term recovery of the hardest hit sectors such as services and transportation is quite unlikely. 

“However, we might be able to see some green shoots once the active cases begin to peak globally. In view of these adverse developments, we have trimmed our 2020 growth forecast to 4.0%,” Chia added. 

In a statement today, D&B said that on a year-on-year (y-o-y) basis, the BOI fell to -21.52 percentage points in 2Q20 from +5.61 percentage points in 2Q19.

Under the BOI study, all six business indicators that consist of volume of sales, net profits, selling price, inventory level, employees and new orders have declined in the quarterly and yearly basis. 

For the quarter-on-quarter basis (q-o-q), net profit declined sharply from +11.11 percentage points in 1Q20 to -40.20 percentage points in 2Q20; volume of sales dived from +8.7 percentage points to -27.84 percentage points; selling price fell from +10.14 percentage points to -10.31 percentage points; new orders contracted from +24.16 percentage points to -26.80 percentage points; employment levels decreased from +9.17 percentage points to -5.21 percentage points and inventory levels fell from -1.93 percentage points to -20.62 percentage points. 

On a y-o-y basis, volume of sales fell from +6.83 percentage points in 2Q19 to -27.84 percentage points in 2Q20; net profit dropped from +1.95 percentage points to -40.20 percentage points; selling price fell from +6.83 percentage points to -10.31 percentage points; new orders plunged from +10.24 percentage points to -26.80 percentage points; inventory levels fell from +4.39 percentage points to -20.62 percentage points and employment levels dropped from +3.41 percentage points to -5.21 percentage points. 

The study revealed that the majority of the sectors are pessimistic about the outlook, and the services and transportation sectors are the least optimistic.

Both services and transportation sectors are pessimistic about their prospects with all six indicators in the contractionary zone for 2Q20. 

Meanwhile, the manufacturing sector expects its outlook to dampen significantly with five indicators in the negative region. Similarly, for the wholesale trade, it said the sentiment for the sector is downbeat and has five indicators in the negative region.

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