Business optimism among Singapore SMEs lowest since 2009

SMALL and medium enterprises (SMEs) in Singapore have been hit hard by the Covid-19 outbreak, with business optimism at its lowest since 2009.

The SBF-Experian SME Index (formerly the SBF-DP SME Index), which tracks business expectations among SMEs, registered a historic low of 48.3 for the upcoming two quarters of this year.

A reading above 50 indicates that companies expect business to improve in the next six months, while a reading below 50 indicates that they expect lower business activity.

The index was launched in 2009 by the Singapore Business Federation (SBF) and information services company Experian, formerly known as DP Information Group.

In a joint statement on Thursday, SBF and Experian said the latest sentiment readings were based on a survey of over 3,000 SMEs conducted between Jan 13 and Feb 28.

The readings comprise seven key areas: turnover, profitability, business expansion, capital investment, hiring, capacity utilisation and access to financing.

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Expectations declined across six of the seven indicators tracked, with the exception of hiring, which was buoyed mainly by demand for additional manpower in the transport/storage sector amid operational gaps caused by China's two-month coronavirus lockdown.

While "significant dips" were seen in expectations around turnover, profitability and access to financing, expectations around business expansion, capital investment and hiring remained positive.

This suggests that SMEs could be adopting a wait-and-see approach to address the economic fallout from the outbreak, the statement said.

Sentiment scores came in below 50 for all six SME sectors surveyed, signalling contractionary sentiments across the board.

The sectors are: commerce/trading, construction/engineering, manufacturing, retail/F&B (food and beverage), business services, and transport/storage.

The retail/F&B sector posted the largest decrease in sentiment among all six sectors surveyed. This was attributed to a sharp fall in tourist arrivals amid travel restrictions, and new social distancing measures for locals.

US-China trade tensions continued to affect turnover for the commerce/trading sector, while regional quarantine orders and travel restrictions disrupted global supply chains for SMEs in the manufacturing and transport/storage sectors.

The statement identified business services and construction as the two most resilient sectors, thanks to the ability to capitalise on business opportunities and robust public sector construction demand respectively.

As the survey was conducted during the early stages of the Covid-19 outbreak, a deeper contraction in business sentiment is expected in the coming weeks, said James Gothard, Experian's general manager for credit services and strategy in South-east Asia.

"Singapore's SMEs appear to be preparing to weather a sustained economic slowdown, putting expansion and investment plans on hold as downside risks materialise," Mr Gothard said.

He added: "The reality on the ground is that SMEs are focused solely on resilience and sustainability to bridge the deepening effect of the economy on their survival."

SBF chief executive Ho Meng Kit said that the federation was working to help SMEs navigate schemes announced in the government's Resilience Budget.

These schemes would provide financial respite for companies, particularly those in the retail/F&B sector, he added.