MALAYSIA’S small and medium enterprises are facing a four-pronged assault on their revenues over the next 12 months as they square up to downward pressure on sales; slower than expected recovery of larger firms, rapid increase in costs; and severe labour shortages, according to Small & Medium Enterprises Association (Samenta).

The association released the findings of two recent surveys today: a mid-term state of the SMEs survey taken in July and a September poll on retail outlook and predictions 2023.

Samenta said continued global uncertainty, including a potential escalation of the Russia-Ukraine war, tension across the Taiwan Strait and a prolonged sell-down in most bourses are also causes for a worrying outlook.

Samenta chairman William Ng said even though Malaysia’s retail sector had seen a rapid recovery since the re-opening of the economy from the Covid-19 pandemic lock down, retailers were far less optimistic on the prospects for 2023.

“In August, for example, sales value climbed year-on-year by 34.5% to RM57 billion. Almost everyone surveyed is bullish about the rest of 2022,” he said.

“However, when asked about prospects for 2023, most respondents were far less optimistic. Two out of three retailers expect a drop in both sales value and volume.

“This is primarily driven by political and economic uncertainty, increase in the overnight policy rate (OPR) and normalisation of ‘revenge shopping’ post-pandemic,” he added.

The bleak outlook, Ng said, is not only hampering growth and recovery, but “is debilitating to our quest to have a vibrant retail sector as one of the cornerstones of our economy”.

To cushion the difficulties, Ng said Samenta is working with the Malaysia Productivity Corporation (MPC) and the Malaysia Digital Economy Corporation to help support affected SME retailers to digitalise, improve their productivity, and their labour and costs issues.

One initiative in working with the government, he said, is the SME digital transformation and productivity programme in partnership with MPC to transform 1,000 SME retailers into digital-ready and digital-first businesses.

“Typically, we will prefer if businesses are left alone to compete fairly, but these are unusual times, and we will need quick government intervention to rebuild consumer (and trade) confidence, contain cost pressure and ease the labour crunch.” – October 28, 2022.