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SME Bank: SME Sentiment Index Indicates Economic Confidence Among MSMEs

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SME Bank has released the results of its SME Sentiment Index for the first half of 2024, revealing an increase in confidence among Micro, Small, and Medium-sized Enterprises (MSMEs) compared to the previous survey in the second half of last year. This index acts as a leading economic indicator, assessing MSMEs’ perspectives on the business environment and providing a benchmark for overall future economic performance.

“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,” said SME Bank’s Group President/Chief Executive Officer, Datuk Wira (Dr.) Aria Putera Ismail. “This positive shift is primarily driven by better economic expectations, improved cash flow, and stronger liquidity buffers among MSMEs. These results reflect the optimism, resilience, and adaptability of our MSMEs as they navigate Malaysia’s steady economic recovery.”


“This upward trend resonates strongly with the Government’s effort under the MADANI Economy framework, which aims to rejuvenate the Malaysian economy by fostering inclusive and sustainable growth. The improved sentiment among MSMEs underscores their critical role in this economic revival, highlighting their ability to adapt and thrive in a dynamic business environment. As we continue to support MSMEs, their positive outlook will be pivotal in driving Malaysia towards a more robust and resilient future,” he added.

Lynette Lee Li Qing, SME Bank’s Chief Economist commented, “The sentiment is consistent with Malaysia’s GDP growth forecast of 4% to 5% for 2024, an increase from 3.6% in 2023. Malaysia’s economy continued to expand by 4.2% year-on-year 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 business tendency statistics from the Department of Statistics Malaysia, also indicate sustained economic expansion. Nonetheless, challenges persist regarding profitability, employment decisions, and expansion initiatives amidst a high-cost environment.”

Balanced Economic Expectations
Compared to the previous survey, MSMEs now have a more balanced view of the economy over the next 6 to 12 months. While 38% of respondents expect economic expansion (up from 33% in 2H 2023), the proportion anticipating a slowdown has decreased to 37% (down from 54% in 2H 2023). This optimism is likely supported by strong household spending, healthy labour market, government cash aid, robust investment activities, and recovery in exports and tourism.

Revenue Expectations and Sectoral Insights
While 53% of respondents anticipate higher revenue in the next 6 to 12 months, this is a decline from 66% in the previous survey, highlighting challenges such as increased competition and a higher-cost environment. By sector, the highest sales expectations are in the manufacture of chemicals (78%), accommodation (69%), and manufacture of food products (68%). Regionally, MSMEs in Sarawak (89%) and Sabah (75%) are the most optimistic, particularly in the construction sector.

Domestic Oriented with Export Potential
In line with the Twelfth Malaysia Plan’s 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%) focusing on domestic markets. Export activity is higher among large-sized businesses predominantly in the manufacturing sector, compared to micro-enterprises.

Cautious Approach to Cost-Related Initiatives
A majority of MSMEs (57%) remain neutral towards changes in government policies such as targeted subsidies and regulatory requirements. The government’s phased approach to structural reforms, including progressive wage policy and subsidy rationalisation, aims to minimise adverse impacts while promoting long-term economic stability.

Financial Sustainability
Specifically, there has been a significant improvement in MSMEs’ financial sustainability. The proportion of respondents with a cash buffer exceeding one year has doubled to 72%, primarily among small and medium-sized businesses. This trend is supported by increased business profits and higher financing disbursements, particularly in the ICT, real estate, and education sectors.

The survey, conducted during the first half of 2024, collected insights from 1,295 participants across all states in Malaysia, representing a wide range of sectors and business sizes. This comprehensive study provided valuable data on the perspectives and experiences of MSMEs, highlighting trends and challenges across different industries. The complete SME Sentiment Index 1H 2024 report, published by SME Bank, is available at: https://www.smebank.com.my/ms/sme-sentiment-index

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