SME Bank will continue its efforts in strengthening its policies, procedures, systems and infrastructure to optimise its service delivery and customer experience stepping into challenging 2023. SME Bank remains committed to provide the right support and going the extra mile to assist Micro, small and medium enterprises (MSMEs) in addressing forthcoming challenges and seizing opportunities.

Group President / Chief Executive Officer SME Bank, Datuk Wira (Dr.) Aria Putera Ismail in a statement said, "SME Bank foresees that the economy will continue growing in 2023 albeit at a moderating pace of 4%-5%, down from the 8% growth forecast for 2022 as headwinds become more evident. Growth momentum is supported by still resilient domestic demand, tight labour market and the prospect of China’s economic relaxation. The forecast is in line with the government’s projection and international bodies such as International Monetary Fund (IMF) and World Bank (Figure 1).”

Challenges Ahead

The global slowdown in demand, alongside persistent inflationary pressures, aggressive tightening of monetary conditions, strong US dollar, and climate change risks pose significant challenges to emerging markets including Malaysia. Domestically, there are some considerable uncertainties as well. Impending subsidy rationalisation, broad-based upward price pressures and monetary policy tightening will likely dampen consumer spending.

SME Bank’s Chief Economist, Lynette Lee commented, “While boost from pent-up demand and full economic re-opening diminishes, our economic growth forecast of 4% - 5% this year is still respectable. Malaysia’s resilient domestic demand, excess individual savings, alongside a diversified economy should cushion against spillover from the external sector. The ongoing recovery in tourism and education related sectors amid spare capacity, investment growth momentum backed by robust approved foreign direct investments and infrastructure projects will continue to lend support to economic growth.”

Centre of Excellence for Entrepreneur Development

MSMEs are unlikely to escape the ripple effects of the moderation in GDP growth as it accounts for 97.4% of overall establishments in Malaysia. “SME Bank forecasts two rate hikes of 25bps each in 1H 2023, bringing the Overnight Policy Rate (OPR) to 3.25% in 2023 as monetary policy normalisation is needed to buffer against any uncertain economic shocks in the future. Nonetheless, the postponement of the RM1,500 minimum wage implementation for micro-enterprises to 1 July 2023 and no electricity hike for households, MSMEs as well as agriculture industries, will allow MSMEs some cashflows flexibility to sustain in 2023,” added Lynette.

“Despite the cautious business environment, MSMEs have indicated through the SME Bank’s 2022 SME Sentiment Index that they are optimistic, resilient and ready to adapt to the current economic challenges. Hence, guided by our SME Bank Future Modality strategic plan, the Bank shall position itself as the national champion to drive entrepreneurship and facilitate the growth of MSMEs. This aspiration can be achieved by creating, nurturing and supporting MSMEs development throughout their lifecycle and thus strengthening the sector’s contribution towards the nation’s economy.” added Datuk Wira Aria.

In 2023, SME Bank will continue to be an effective agent of change by advocating and promoting ESG adoption among MSMEs through more sustainability-linked offerings with competitive rates such as High Tech and Green Facility (HTG), Low Carbon Transition Facility (LCTF), Young Entrepreneur Fund 2.0 (YEF 2.0) and IBS Promotion Fund 2.0 (IBS 2.0).

Through SME Bank Future Modality, SME Bank will be focusing on four pillars namely to be Centre of Excellence (CoE) for Entrepreneur Development through its training arm, Centre for Entrepreneur Development and Research Sdn Bhd (CEDAR), advocating ESG adoption among MSMEs, strengthening digital ecosystem and offering niche products and services.  CEDAR will amplify its role through the development of Social Enterprises to achieve accreditation as well as coaching MSMEs to boost the adaptation of ESG in their business operations.

The SME Bank Future Modality strategic plan is aligned with Bank Negara Malaysia’s Performance Measurement Framework (PMF) emphasises the importance of Development Financial Institutions (DFIs) incorporating additionalities as part of business operations to promote greater development outcomes and strengthening accountability as public institutions.

For more information about SME Bank’s wholesome financing assistance as well as various entrepreneur development programmes, visit www.smebank.com.my, SME Bank Facebook www.facebook.com/smebank or call SME Bank’s Contact Centre at 603-26037700.

Figure 1: GDP Growth Forecasts (% YoY)

--- indicates the lower range of the forecast.

Source: IMF World Economic Outlook (Oct 2022), World Bank East Asia & the Pacific Economic Update (Sep 2022), Ministry of Finance (MOF) Malaysia