Slump in Optimism amongst MLEs but also pockets of hope
Embargoed until Monday 5th January 2009
Dato’ NK Jasani Managing Partner, SJ Grant Thornton (pix)
Kuala Lumpur, 5 January 2009 - Optimism amongst Medium to Large Enterprise (MLEs) around the world has slumped by 56% in the last 12 months and pushed the Grant Thornton International optimism/pessimism barometer to a record negative balance of -16% compared to +40% this time last year. It is the first time pessimists have outweighed optimists about the outlook for their economy since the research began in 2003. This year's International Business Report, which surveyed senior executives from over 7,000 MLEs across 36 economies, also shows an overwhelming consensus that falling consumer demand is the biggest threat to MLE businesses. There are also some startling differences in attitude towards the economic crisis between the mature and emerging economies.
1Shares of world GDP based on PPP according to IMF World Economic Outlook 2007.
The accounting and consulting firm’s Malaysian member SJ Grant Thornton Managing Partner Dato’ N. K. Jasani said, “Malaysian businesses optimism balance has deeply slumped from +38% to +2%. The slide in consumer demand is the greatest concern for the Malaysian business owners. Besides that, the shortage of consumer credit also holds threat to local business owners.”
The Asian countries have remained optimistic with India heading the list at +83%. The second highest optimistic Asian country is the Philippines +65% followed by Vietnam +31%. Hong Kong had suffered the biggest swing, which went from +81% optimistic last year to -49%, a factor of its exposure not only as one of the hard hit financial services centres but also of its close trading links with both the East and the West. The least optimistic business owners are the Japanese. Pessimism levels in this year’s survey slumped form a balance of -49% last year to -85% this year. In regards to Japan, the pessimism drop is more pertinent rather than absolute yearly recordings in view of the Japanese over cautious tendency.
Of the four largest trading nations, United States and mainland China, who together contribute over 32% of global GDP1, scored their optimism at -34% in the United States and +30% in mainland China. Similarly, Japan and India (collectively contributing over 11% of global GDP) scored their optimism at -85% and +83% respectively.
"These polarised results suggest there are still pockets of hope in the global marketplace and it is no coincidence that MLEs are some of the first to realise," explained Dato’ N.K. Jasani. "Their macro view of the world economic stage explains the overall slump in optimism but while MLEs are preparing for a prolonged and painful downturn, those in the emerging economies realise that at their own micro level it could offer real opportunities for resilient and efficient MLEs.”
When asked to identify the single factor causing most concern for their business, MLEs in 33 out of the 36 economies cited a fall in consumer demand with a shortage of business credit a secondary concern. Dato’ N.K. Jasani added, "The economies in our survey contribute 81% of global GDP. If politicians were in any doubt about the need to take steps to boost consumer spending and kick start the global economy this overwhelming consensus from MLEs should surely persuade them."
"MLEs can have huge advantages over listed companies in times of commercial stress. Management can make decisions quickly because there are fewer stakeholders involved and MLEs' greater flexibility means change can be implemented faster than in more bureaucratic mega entities. We're telling our clients to take swift, decisive action to defend their businesses cash flow in the short term but to hold their nerve and develop a strategic plan for the long term - a new commercial environment will emerge but it could be very different to the current one."
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Issued on: 5 January 2009
Notes to editors:
About SJ Grant Thornton:
SJ Grant Thornton is a member firm within Grant Thornton International Ltd and provides assurance, tax, corporate finance, corporate restructuring and management consulting services.
The firm operates from its main office in Kuala Lumpur and its other offices in Penang, Johor and Kuantan.
About IBR:
The Grant Thornton International Business Report (IBR), formerly known as the International Business Owners Survey (IBOS), provides insight into the views and expectations of chief executive officers, managing directors, chairmen or other senior executives over 7,200 Medium to Large Enterprises (MLEs) across 36 economies. This unique survey draws upon 17 years of trend data for most European participants and seven years for many non-European economies.
This will be the fourth time the Malaysian firm is participating in the Global Report, now in its seventh consecutive year. For its previous involvement, the full results were launched in July last year by YB Tan Sri Muhyiddin Yassin, Minister of International Trade and Industry Malaysia.
Grant Thornton International will donate US$5 to UNICEF for every completed IBR questionnaire. In 2009, this will result in a donation of over US$36,000. The research was conducted by Experian Business Strategies Limited. To find out more about IBR and to obtain details of IBR reports and results please visit www.internationalbusinessreport.com.
SJ Grant Thornton is a member firm within Grant Thornton International Ltd (Grant Thornton International). Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by the member firms.
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