| Summary: | Small and Medium Enterprises (SMEs) in Malaysia have gained a prominent role as the significant contributor to the economic growth. However, the world nowadays is heading towards economic downturn. The stability of macroeconomic variables promotes profitability of SMEs which propels them to a stage where they can access financing for sustaining growth. Therefore, it is apparent that the behaviour of the macroeconomic variables plays a major part in determining the nation's backbone in surviving the economic downturn. The objective of this study is to evaluate the impact of macroeconomic variables on the profitability of SMEs in Malaysia using multiple regression analysis. The findings revealed that the exchange rate has a small positive impact on SME GDP growth rate (10.81%), the interest rate has a strong positive impact (60.74%), while the inflation rate has a strong negative impact (-53.89%). Therefore, it can be concluded that the interest rate and inflation rate have significant impacts on the profitability of SMEs in Malaysia.
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