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Expect business activity to plummet till year end, says FMM

FMM In The News: FREE MALAYSIA TODAY, PETALING JAYA, Wednesday, September 1, 2021 - Business activity is expected to continue plummeting for the rest of the year, the Federation of Malaysian Manufacturers said today.

Based on the FMM-Malaysian Institute of Economic Research (MIER) Business Conditions Survey 1H2021, all current and forward-looking indicators except for the cost of production, registered lower than the second half of 2020, a sign that the first half of this year was a “very challenging period” for manufacturers.

FMM president Soh Thian Lai said manufacturers reported that business activity declined drastically in the first six months of 2021.

“The general business activity index plunged far below the 100-point optimism threshold to 65, losing 36 points from 2H2020. Some 54% of respondents reported a drop in their business activity in 1H2021, up from 37% in 2H2020,” he said.

Soh said local sales performed worse than export sales in 1H2021 adding that current local and export sales dropped to 56 points and 71 points, respectively, from 2H2020.

Another key statistic that was highlighted in the survey was the rise in the cost of production in 1H2021 which was higher compared with the level of increase in 2H2020.

He said the current business conditions are expected to continue into 2H2021 as the Covid-19 pandemic continues to cast uncertainties on the economy and the prospects of firms going forward.

He said the index for expected business activity also fell with 55% of the respondents anticipating their business to be equally slow for the rest of the year.

“Both local and export sales have declined. This implies that domestic and external demand are likely to remain weak.

“Employment is expected to remain flat, which implies that jobs in the manufacturing sector will be harder to come by in the coming months,” he said.

In view of this, Soh said there needed to be an effective exit strategy for Covid-19 which includes having to accept it as an endemic in business operations.

“The majority of respondents believe that employers should ensure all their employees are fully vaccinated, as well as receive booster shots.

“There should be a moratorium on minimum wage increases for the next 18 months and a review on minimum wages according to states and not a blanket rate for all,” he said.

Soh added that other government assistance was required, such as a reduction in corporate tax, electricity and natural gas discounts, and an extension of a targeted wage subsidy to workers in all sectors.

The survey is a biannual collaboration between FMM and MIER, involving 687 respondents nationwide who participated from July 16 to Aug 16.

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