Business sentiment weakens further in 2Q as US tariffs, cost pressures weigh
by RUPINDER SINGH
MALAYSIAN businesses are bracing for rougher seas in the near term, as the RAM Business Confidence Index (RAM BCI) slipped further to 40 in the second quarter of 2025 (2Q25) from 41.1 in 1Q25 — marking the second straight quarter of negative sentiment on business prospects.
The index reading, which remains well below the neutral level of 50, reflects growing anxiety among firms over deteriorating external conditions, particularly the fallout from escalating US protectionist policies.
'This marks the second consecutive quarter of negative sentiment on business prospects, which aligns with the rapidly escalating risks in global trade stemming from rising US protectionism policy,' RAM said in a statement released last week.
Three out of the five sub-indicators — sales, capital investment and capacity utilisation — posted quarter-on-quarter (QoQ) declines, underscoring a broader pullback in business activity.
While the hiring and inventory sub-indices showed some resilience, they remained below the neutral threshold, suggesting that firms are still in defensive mode.
The latest survey, conducted between May 29 and June 28, involved 33 firms across multiple sectors. RAM's findings point to persistent headwinds, with 80% of respondents identifying the rising cost of doing business as their top concern — a trend that has remained dominant over the past year.
Other major challenges cited include heightened competition (63%) and weak economic conditions.
More worryingly, supply chain disruptions are re-emerging as a key issue.
The share of firms reporting supply chain issues jumped by 11 percentage points to 40% in 2Q25.
Tariff Fears in Focus
A special section of this quarter's survey homed in on the perceived impact of US tariffs on Malaysian goods, a policy shift that has rattled exporters and manufacturers alike.
Two-thirds of firms anticipate negative fallout, with 27% of respondents expecting a 'major negative impact', while 18% foresee a 'moderate' and another 18% a 'minor' impact.
Sales and revenue are expected to be hit hardest, followed by profit margins, supply chain performance and cashflow.
Nearly half of the respondents plan to cope by cutting operational costs or adjusting pricing strategies to remain competitive.
'In response, firms are mainly adopting cost-related strategies to mitigate tariff impacts. About 42% are focusing on cutting operational expenses, while 39% are adjusting pricing strategies to remain competitive,' RAM noted.
Meanwhile, 33% of firms said they would diversify their product or service offerings and 30% are looking to reduce reliance on exports altogether.
Only a small portion — 18% — plan to explore alternative export markets, indicating limited room for manoeuvre in the short term.
Industry Calls for More Policy Support
Amid mounting challenges, the call for stronger government intervention is growing louder.
Businesses overwhelmingly expressed the need for greater access to financing and working capital, with 53% listing this as the most helpful form of support. Grants or direct subsidies (48%) and export promotion assistance (39%) also ranked high on the wishlist.
'Businesses are calling for more assistance from the government, especially in terms of better access to financing and working capital. Grants and direct subsidies are equally in demand to help offset the challenges posed by trade tensions,' RAM said.
The uncertain global trade environment and rising costs have greatly shadowed near-term corporate confidence.
However, there are still glimmers of resilience — firms are not entirely pulling back from growth plans.
'While businesses remain cautious, it is encouraging to see that companies are still investing and hiring,' said RAM Holdings Bhd group CEO/ED Chris WK Lee.
'It is crucial that government and industry stakeholders work together to respond to the new challenges for businesses to survive and thrive,' he added.
Still, with overall business confidence slipping deeper into negative territory, any recovery in investment and production will depend heavily on how quickly policymakers can respond to the evolving trade landscape and domestic cost pressures.
This article first appeared in The Malaysian Reserve weekly print edition
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
35 minutes ago
- The Star
Regulating online fraud: Malaysia's OSB vs China's approach
INITIATED in the 2010s, China's Digital Silk Road (DSR) aims to enhance digital connectivity across nations through infrastructure, trade, finance, people-to-people exchanges and policy coordination. It presents new commercial opportunities for Malaysia by fostering collaboration between Chinese and Malaysian businesses, strengthening Malaysia's digital economy ecosystem. The convergence of China's DSR, the Covid-19 pandemic, and the rapid rise in artificial intelligence (AI) have significantly accelerated the adoption of digital technologies in business processes and operations within Malaysia. However, while digitalisation offers numerous benefits, it has unfortunately also led to a significant surge in online criminal activity. A recent report by The Star revealed that nearly RM600mil was lost to online fraud from January to March, according to the Bukit Aman Commercial Crime Investigation Department. The report highlighted that criminals are exploiting technological advancements and modern lifestyles, using fake digital identities, fraudulent websites, chatbots and deepfakes to deceive victims. Recognising the escalating threat posed by these sophisticated methods, regulatory interventions focused on online content have become a prevailing trend. Malaysia, in line with this trend, passed the Online Safety Bill (OSB) 2024 in December. It is awaiting official gazettement, and its effective date will be determined by Communications Minister Datuk Fahmi Fadzil. The new law aims to enhance online safety in Malaysia by regulating harmful content and establishing duties and obligations for application service providers (those who provide network services such as Internet access), content application service providers (those who provide content such as broadcasting and video streaming), and network service providers (those providing cellular mobile services and bandwidth services) operating within and outside Malaysia. According to Minister in the Prime Minister's Department (Law and Institutional Reforms) Datuk Seri Azalina Othman Said, it applies to licensed application and content service providers such as Instagram, WhatsApp, TikTok and YouTube. The Bill regulates two categories of content: 'harmful content' and 'priority harmful content'. Its First Schedule defines the scope of harmful content, which includes content on financial fraud, excluding content that promotes awareness or education related to financial fraud. The content on financial fraud listed in the First Schedule is also classified as 'priority harmful content' in the Second Schedule. Key duties imposed on service providers include the obligation to implement measures to detect and mitigate harmful content (Section 13), issue user guidelines (Section 14), establish mechanisms for handling user reports of potentially harmful content (Sections 16 and 17), and prepare an Online Safety Plan (Section 20). For priority harmful content, such as financial fraud, service providers must take steps to prevent user access (Section 19). Despite Fahmi's assurance that the government's intention in introducing the OSB is to serve as a measure to combat crime, such as financial fraud, and not to restrict freedom of expression, critics remain concerned about its potential to restrict freedom of expression and be used as a censorship tool by the government. These are valid concerns, particularly considering the vague definition of harmful content in the OSB and the vast powers conferred on a commission reporting to the Communications Ministry. This commentary limits its discussion to the Bill's role concerning content on financial fraud. It is undeniable that unregulated content involving financial fraud, such as online scams, can damage business reputations and cause financial losses. Deputy Communications Minister Teo Nie Ching reported that RM1.224bil was lost to online crimes and scams in Malaysia within the first 10 months of last year, with many victims falling prey to sponsored advertisements on social media platforms. Indeed, a duty should be imposed on service providers to prevent these platforms from profiting from sponsored advertisements involving financial scams, for which they receive payment to promote products or services. Nevertheless, the provisions in the OSB are still lacking when viewed from the perspective of curbing online fraud. In China, the government passed the Anti-Telecom and Online Fraud Law ('ATOF Law') in September 2022. This law is more specific, aiming to prevent, deter and punish telecommunications and online fraud, strengthen efforts against such fraud, and protect the rights and interests of citizens and organisations. It imposes responsibilities on key businesses in the telecommunications, financial, and Internet sectors to prevent fraud risks. Among these requirements, the law requires service providers to verify users' identities before providing a range of services, such as web hosting, content and software distribution, livestreaming and advertising (Article 21). The law also imposes a duty of reasonable care on service providers to monitor, identify, and address the use of their services to commit fraud (Article 25). The ATOF Law provides a model regulation for targeted fraud prevention. While Malaysia and China operate within different legal and cultural frameworks, there are valuable lessons to be learned from China's experience in addressing online fraud. China's preventive measures have contributed to a more secure digital environment for businesses and consumers, minimising the impact of online fraud. While the Malaysian government's efforts to ensure a secure online environment and build trust in the digital ecosystem are laudable, more targeted provisions focused on the specific mechanics of online fraud would be more efficient, like China's ATOF Law, instead of a broad content regulation approach. China's ATOF Law, which emphasises user verification and platform monitoring for fraudulent activities, would allow for a more focused approach to content regulation. It is imperative that the Malaysian government review the adequacy of the OSB in achieving its intended purpose of curbing online crime. To enhance its efficacy, the government could consider incorporating more granular provisions that mandate specific actions from service providers and establish clear and enforceable guidelines and penalties. A well-regulated online environment, one that builds trust and security, can attract foreign investment and facilitate DSR-related collaborations, shaping the long-term trajectory of Malaysia's digital economy. Lai Chooi Ling is a lecturer at Tunku Abdul Rahman University of Management and Technology (TAR UMT). The views expressed here are entirely the writer's own. The SEARCH Scholar Series is a social responsibility programme jointly organised by the South-East Asia Research Centre for Humanities (SEARCH) and TAR UMT.
Borneo Post
35 minutes ago
- Borneo Post
BNM revises Malaysia's 2025 GDP growth projection to 4.0-4.8 pct
BNM)has revised Malaysia's 2025 GDP growth projection to between 4.0 per cent and 4.8 per cent from 4.5 per cent – 5.5 per cent previously.– Photo from KUALA LUMPUR (July 28): Bank Negara Malaysia (BNM) has revised Malaysia's 2025 gross domestic product (GDP) growth projection to between 4.0 per cent and 4.8 per cent from 4.5 per cent – 5.5 per cent previously. The projection takes into account various tariff scenarios, ranging from continued elevation of tariffs to more favourable trade negotiation outcomes. In a statement today, the central bank said the forecast remains subject to uncertainties surrounding the global economy, both on the downside and the upside. 'Favourable trade negotiation outcomes, pro-growth policies in major economies, continued demand for electrical and electronic goods, and robust tourism activity could raise Malaysia's export and growth prospects,' it said. Meanwhile, BNM Governor Datuk Seri Abdul Rasheed Ghaffour said the Malaysian economy remains resilient despite global uncertainties, supported by the outcome of structural reforms undertaken over the years. 'The sustained strength in economic activity and moderate inflation provides a supportive environment to pursue structural reforms for a more resilient and competitive Malaysia in the future,' he said. According to the central bank, headline inflation is projected to remain moderate, averaging between 1.5 and 2.3 per cent in 2025, reflecting the more moderate cost and demand outlook since March 2025. 'Inflationary pressure from global commodity prices is expected to remain limited, contributing to moderate domestic cost conditions. In this environment, the impact of domestic policy measures is expected to remain contained,' it said. BNM noted that the global economic landscape has undergone considerable changes since the announcement of Malaysia's 2025 GDP growth forecast in Bank Negara Malaysia's Economic and Monetary Review in March 2025. It said the global growth outlook is affected by shifting trade policies and uncertainties surrounding tariff developments, as well as geopolitical tensions. 'As a small open economy, Malaysia's growth prospects will be shaped by these developments. It is to Malaysia's advantage that our economy is facing these external headwinds from a position of strength. 'The latest indicators, including advanced estimates for the second quarter growth, continue to point towards sustained strength in economic activity. Domestic demand has been resilient and will continue to support growth going forward,' it said. Favourable labour market conditions — particularly in domestic-oriented sectors — and policy measures will continue to underpin private consumption. Meanwhile, BNM said expansion in investment activity will be sustained by progress in multi-year infrastructure projects, continued high realisation of approved investments and catalytic initiatives under the national development plans. — BERNAMA TAGS: BNM, GDP, revised, tariff, global economy ZER ZER NII Monday , 28 July 2025 2025 Bank Negara Malaysia GDP projection
Malaysian Reserve
35 minutes ago
- Malaysian Reserve
BNM revises 2025 GDP projection to 4.0-4.8%
KUALA LUMPUR — Bank Negara Malaysia (BNM) has revised Malaysia's 2025 gross domestic product (GDP) growth projection to between 4.0 per cent and 4.8 per cent from 4.5 per cent – 5.5 per cent previously. The projection takes into account various tariff scenarios, ranging from continued elevation of tariffs to more favourable trade negotiation outcomes. In a statement today, the central bank said the forecast remains subject to uncertainties surrounding the global economy, both on the downside and the upside. 'Favourable trade negotiation outcomes, pro-growth policies in major economies, continued demand for electrical and electronic goods, and robust tourism activity could raise Malaysia's export and growth prospects,' it said. Meanwhile, BNM Governor Datuk Seri Abdul Rasheed Ghaffour said the Malaysian economy remains resilient despite global uncertainties, supported by the outcome of structural reforms undertaken over the years. 'The sustained strength in economic activity and moderate inflation provides a supportive environment to pursue structural reforms for a more resilient and competitive Malaysia in the future,' he said. According to the central bank, headline inflation is projected to remain moderate, averaging between 1.5 and 2.3 per cent in 2025, reflecting the more moderate cost and demand outlook since March 2025. 'Inflationary pressure from global commodity prices is expected to remain limited, contributing to moderate domestic cost conditions. In this environment, the impact of domestic policy measures is expected to remain contained,' it said. BNM noted that the global economic landscape has undergone considerable changes since the announcement of Malaysia's 2025 GDP growth forecast in Bank Negara Malaysia's Economic and Monetary Review in March 2025. It said the global growth outlook is affected by shifting trade policies and uncertainties surrounding tariff developments, as well as geopolitical tensions. 'As a small open economy, Malaysia's growth prospects will be shaped by these developments. It is to Malaysia's advantage that our economy is facing these external headwinds from a position of strength. 'The latest indicators, including advanced estimates for the second quarter growth, continue to point towards sustained strength in economic activity. Domestic demand has been resilient and will continue to support growth going forward,' it said. Favourable labour market conditions — particularly in domestic-oriented sectors — and policy measures will continue to underpin private consumption. Meanwhile, BNM said expansion in investment activity will be sustained by progress in multi-year infrastructure projects, continued high realisation of approved investments and catalytic initiatives under the national development plans. — BERNAMA
