By Asila Jalil  – July 13, 2022 @ 9:24am

KUALA LUMPUR: Businesses will have to reassess their financing needs to accommodate rising demand following the relaxation of restrictions as Malaysia shifts to endemicity.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said although the recent rise in the overnight policy rate (OPR) might not significantly affect consumer spending, rising demand coupled with rising cost of doing business required pragmatic solutions in the long run.

“They may need to reassess their financing needs as the economy is expected to grow given the relaxation of human mobility.

“Capital expenditure is typically sizable but necessary in order to ensure the businesses have the capacity to cope with rising demand. They have to weigh their options sooner as the OPR could be higher in the future,” he told New Straits Times.

Bank Negara Malaysia’s Monetary Policy Committee had raised the OPR by a combined 50 basis points in May and early this month to 2.25 per cent after the lending rate had been at a historic low of 1.75 per cent since July 2020.

The ceiling and floor rates of the corridor of the OPR were correspondingly increased to 2.50 per cent and 2.00 per cent respectively.

For businesses that had been running with physical spaces, Mohd Afzanizam said they might need to find solutions to adapt with the new environment instead of going back to pre-Covid way of operations despite the eased restrictions.

“All businesses will have their own set of challenges be it from regulatory perspectives, competitive landscape as well as rising cost of doing business.

“I do not think an outright cut in expenditure would be the way to go as this can compromise the productivity level.”So we need to choose our options wisely and not simply go back to the old days just because there are less restrictions during endemicity,” he said.

After the pandemic battered economies in the past two years, businesses were forced to enhance their online presence in order to stay afloat.

SME Association of Malaysia national secretary general Chin Chee Seong opined that the eased restrictions would boost sales for physical outlets but those with online presence would continue to grow, especially for small and medium enterprises (SMEs).

“Business would definitely continue their online presence especially for SMEs, they have no reason to stop it.

“Customers may still prefer going to physical stores for groceries and fresh produce as we move back to the norm but some of the conveniences provided by online platforms, there are still a big portion of customers that will remain online purchases,” he said.

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Source of this article: https://www.nst.com.my/business/2022/07/812956/time-reassess-financing-needs