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Malaysian manufacturing sector pessimistic in projections on business prospects for rest of 2020 — FMM

Malaysian manufacturing sector pessimistic in projections on business prospects for rest of 2020 — FMM

15 Aug 2020

The Malaysian manufacturing sector continues to take on a very pessimistic stance in their projections on the prospects of their businesses for the rest of 2020, says the Federation of Malaysian Manufacturers (FMM).

In a statement today, FMM president Tan Sri Soh Thian Lai said for most companies, overall business activities including sales, both domestic and exports, for the next six months are still expected to be low as they continue with their business revival and recovery.

“Business recovery may take anything between four months to two years depending on the sectors and impact that Covid-19 has had on the business.

“Supply chains continue to be impacted with delays in deliveries from suppliers and with shippers experiencing increase in logistics and shipping costs, increase in raw material prices as well as shortages in supply,” said Soh.

He said it is also anticipated that when the automatic bank loan moratorium period and the six-month wage subsidy period end in September 2020 for most companies, businesses will be faced with a double cost whammy which could severely impact their initiatives to revive their businesses.

Commenting on Malaysia’s 17.1% gross domestic product contraction in its second quarter of 2020, Soh said the performance in the second quarter affirms the brutality of the impact of the global Covid-19 pandemic and the Movement Control Order (MCO) on the entire economy.

He said the Covid-19 pandemic and the subsequent MCOs had rendered manufacturers inoperable, some for a few months depending on their type of business activity, resulting in substantial drops in revenue, financial losses and severe trade challenges including disruptions to supply chains which had in turn impacted business sustainability, employment and productivity.

Soh said the performance of the economy in the second quarter is mirrored by the feedback from FMM members in a recently concluded survey where it reported a record fall in business activity in the first half of 2020 for manufacturers with sales performing dismally — both local and exports — dampened production and capacity utilisation, record low capital investments and lacklustre employment opportunities.

He said the majority of members also reported that both revenue and profits were negatively affected resulting in many having to undertake several cost cutting measures including manpower cost reductions.

Source: The Edge Markets