This article first appeared in The Edge Financial Daily on April 3, 2019

KUALA LUMPUR: The local Chinese business community is less optimistic about this year’s economic outlook.

Slightly more than one-third of respondents in a survey conducted by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) said the “economy would remain challenging in 2019”, but expect conditions would likely improve in 2020.

About 37.5% of the respondents are pessimistic about the economic outlook for this year, while 15.3% cited optimism about economic prospects in 2019, according to the ACCCIM's Business and Economic Conditions Survey Report released yesterday.

The cautious view on the domestic economy and business prospects in 2019 is due to external and domestic challenges, including a moderating global growth, the trade tension between the US and China, the Brexit impasse as well as a domestic policy transition amid a weakening consumer sentiment and investor confidence.

On next year’s prospects, about a quarter of the respondents are more optimistic about the local economy, while about 21.9% expressed pessimism.

The rising optimism is attributed to a more stable domestic policy landscape as well as the expected improvement of the federal government’s fiscal balance sheet in 2020, following a spending rationalisation and a debt consolidation.

About 44.3% of the entrepreneurs polled in the real estate sector are pessimistic about this year’s economic outlook.

 This is followed by the construction sector (38.9%) dampened by a review of public infrastructure projects, the rationalisation of public investments and a continued consolidation of non-residential development projects.

Nonetheless, all sectors are positive about a better 2019.

However, businesses have turned cautious about their capital expenditure plans.

The percentage of them planning to increase capital investment dropped 3.6 percentage points to 45.7% in the first half of 2019 (1H19) from 49.3% in 2H18.  

The survey also stated the businesses’ cautious approach in undertaking capital investment is in line with production and sales performance as well.

 “Policy certainty and clarity, as well as a good execution of policies, are crucial for the medium- to long-term business decisions and planning,” said ACCCIM president Tan Sri Ter Leong Yap.