Business confidence in Malaysia has increased in the first quarter of 2017 as the economy benefits from rising commodity prices and improving trade prospects, according to the latest edition of the Global Economic Conditions Survey.
The quarterly survey of global CFOs and finance professionals, conducted by the Association of Chartered Certified Accountants and the Institute of Management Accountants, has found that global economic sentiment has risen to its highest levels since 2015 amid promising signs of a sustained recovery.
The rise has been spearheaded by an increasingly confident outlook in North America and is reflected across leading developed and emerging markets. In particular, there has been the fastest rate of growth in global trade since 2015.
“Although the rise in confidence is relatively small by historical standards, it reflects an increase in GDP and prospects for international trade,” says Jeyasothy Palakrishnar, country head of ACCA Malaysia.
“This economic improvement also means the government are able to continue to support growth through investment and expenditure, which is also boosting confidence. Amid global inflationary pressures, however, the potential for future exchange rate fluctuations for the ringgit is an area of concern for businesses in Malaysia.”
The survey has found that inflationary fears are putting pressure on global economies, with nearly half (46%) of firms reporting increasing costs as a cause for concern.
Despite this there are significant improvements for employment and investment, with 22% of firms planning to create more jobs and raise capital expenditure (up from 16% and 14% respectively in Q4 2016).
Faye Chua, head of business insights at ACCA, says that the global economy has so far proven resilient in the face of multiple policy challenges.
“The rise in confidence, combined with strong economic hard data, offers genuinely encouraging signs for the global economy: with an increasingly optimistic mood in the US and a stimulus-led recovery in China driving prospects for world trade,” says Chua.
Chua notes that the strong start to the year has taken place against a backdrop of potential threats facing the world economy at the start of 2017.
There have been uncertainties over the future of US trade policy under the new administration, the potential of a Eurozone banking crisis during a key election year across Europe and the UK’s triggering of Article 50 to begin the process of leaving the EU.
Yet many of these fears have yet to be realized, and the prospect of increased government spending as austerity measures come to an end in many developed economies means that short term prospects look bright. These are the clearest signs of a synchronized and sustained recovery since 2011, and we can reasonably expect that to continue over the next two quarters.
Chua adds that policy-makers will have an important role in the coming months.
“This quarter demonstrates there are signs that the global economy is returning to a degree of health after some very tough years: the IMF is expecting global growth of 3.4% this year, the fastest rate since 2012,” says Chua.
Yet in this period of fragile recovery, a number of policy interventions could have a significant impact.
The new US administration has proven moderate in trade policy so far but the potential remains that a more restrictive direction could be implemented.
Similarly, while the UK and Eurozone have so far remained unaffected by the prospect of Brexit, that could change as Article 50 negotiations begin and the French and German elections draw closer.
“How policy-makers respond to this uncertainty, and growing inflationary pressures, will be crucial over the coming months,” says Chua.