PETALING JAYA: Small and Medium Enterprises Association (Samenta) is relieved on the unchanged Overnight Policy Rate (OPR), which would allow for stabilisation of the economic conditions that are conducive for its members.
This reaction comes with Bank Negara Malaysia (BNM) announcing today that the Monetary Policy Committee has maintained the OPR at 3.00%, during its meeting.
According to SME Association of Malaysia secretary-general Chin Chee Seong, the central bank’s decision was welcomed by its members as it will allow for the economic environment to remain stable and unpredictable.
“This may allow businesses to maintain their borrowing costs, have more predictable consumer spending, and may be able to plan for cash flow. This stability allows businesses to plan and operate with more confidence,” he told SunBiz.
He added that any increase will further increase the burden on SME and further exacerbate the “already problematic cash flow issue”.
Earlier this week, the association conducted a survey which found that more than 50% of SME are performing poorly, with more than 50% either having difficulties in cash flow management or lack of funding.
“Especially in retail, trade and services and...that most SME are experiencing severe economic conditions in Malaysia where consumer spending is eroding especially after Hari Raya Adilfitri.
“It is very important for the government to focus immediately on how to help, particularly to improve the economic situation of the country. If the OPR increases again, it is certain that consumer spending will decrease further and that SME will eventually be seriously affected,” he remarked.
Samenta national secretary Yeoh Seng Hooi said that the decision is beneficial to SME as it keeps financial costs at bay.
He said that importance should be placed on stimulating domestic demand. He pointed out that political stability and ease of doing business will also improve the business climate.
On the other hand, he believes that the retail sector is impacted due to belt tightening and disposable income issues.
“The threat of targeted subsidies has spooked the M40 which leads to controlled spending. Non-essential items such as white goods and furniture could be impacted,” he said.
Furthermore, he said that inflation is not the main “bogey man” at present and in order to boost the economy, consumer spending has to pick up. He cited a report, Vistage-MIER CEO Confidence Index, that found a significant drop in Expected Revenue Growth from 151 for the first quarter in 2023 compared with 141 in its previous quarter, which he opined to be “alarming”.
In terms of whether BNM will increase its OPR rate, he said that the association hopes that the decision makers are targeting the right policy variable as the panacea is to stimulate domestic demand.
“Local traders who are importing are reeling from the weak ringgit and soft domestic demand. Let's not aggravate the economic situation further with higher rates in the near future. We should not choke the growth too early,” he said.
Meanwhile, SME Association of Malaysia national president Ding Hong Sing said that its members are pleased with the decision to maintain the OPR as it is, as SME are able to maintain its “business as usual”.
He remarked that it has removed the need for businesses to counter with cost-saving strategies, in order to maintain profit margin such as increasing product prices, which will affect consumers.
However, he anticipates that the central bank will increase its OPR likely year-end but hopes that it will be delayed for one or two years until the economy stabilises.