KUALA LUMPUR (Oct 25): Business confidence in Malaysia has remained steady during the third quarter of 2016 (3Q16); however, the rising household debt is now the foremost concern, according to the report on Global Economic Conditions Survey (GECS)
The outcome of the survey showed that business confidence in Asia-Pacific has improved for the fourth consecutive quarter due mainly to improved confidence in the region's biggest economy, China.
Although the survey findings showed that business confidence appears to be improving, the Association of Chartered Certified Accountants (ACCA) Malaysia's head David Chin expressed caution on the rising household debt observed in Malaysia.
"Malaysia has outperformed Singapore and fellow regional trading partners this quarter in terms of confidence, which is a positive thing to note. But concerns about rising household debt predominantly observed in Malaysia, Singapore, Korea, and Thailand has preyed on overall prospects within the region.
"Thus, the affordable housing incentives and enhanced tax incentives announced by the Prime Minister in the recent Budget 2017 will have significant implications and are a positive nudge towards addressing this household debt strain," he said in a statement today.
The survey also showed almost half (46%) of respondents in Asia-Pacific reported feeling less confident about their prospects than the past quarter, which is well above the global average of 38%. This is despite improving confidence in general, aided by an improved outlook for China and Hong Kong.
In 3Q16, confidence in Hong Kong increased sharply, while it fell in Singapore, and was broadly flat in Malaysia. The sharp rise in confidence in Hong Kong reflects the improved prospects for China, which is Hong Kong's largest trading partner. The fall in Singapore could have been due to renewed concerns over the outlook for the city state's overheating property market.
Meanwhile, Chin anticipates that the upcoming presidential election in the US will be felt globally for the foreseeable future.
On the global front, business confidence is at a 12-month high, boosted by increased prospects of government spending and recoveries in China and North America.
"Despite improvements in confidence, the world has yet to see it translate into a meaningful boost to hiring and investment as reported only 19% of companies said they are considering hiring new staff and 14% were looking at opportunities to invest in new technology," he said.
Chin said Malaysia should learn from the Organisation for Economic Co-operation and Development (OECD) in terms of investment driving confidence.
"Across the OECD there is a strong correlation between governments reaching for their wallets following years of austerity and improving confidence. This underlines the importance of investment to support economic growth.
"North America is performing strongly in contrast to most other regions, helped by strong employment growth in the US. Meanwhile, confidence in China is at its highest level since 2012, which has had an uplifting effect on many emerging markets. Even Brazil, which has been in deep recession for several years, and Russia are showing tentative signs of improvement," he said.
The survey was conducted by the ACCA and the Institute of Management Accountants (IMA).
Fieldwork for the report took place between Sept 2 and 19, and attracted 1,512 responses from ACCA and IMA members around the world, including more than 150 chief financial officers.