Singapore SMEs performance and health have improved beyond pre-'circuit-breaker' levels: OCBC

LOCAL small and medium-sized enterprises' business performance and health have recovered, and improved beyond pre-"circuit-breaker" levels in Q1 this year.

Within industries, the healthcare and transport and storage sectors have led the recovery since the third quarter of last year.

That is according to a new quarterly SME index by OCBC, derived using the bank's transaction data of over 100,000 SME customers in Singapore with up to S$30 million in annual sales turnover.

In Q1 this year, the index rose to 51.2, from 50.1 in Q1 2020 (when the index was started). This reflects an improvement in SMEs' overall health and performance from a year ago.

The index also looks at a number of indicators including sales collections, payments, cash flow and operating transactions of the SMEs with OCBC. Collections and payments in Q1 2021 showed a 5 per cent and 4 per cent year-on-year improvement, respectively.

The index also showed a V-shaped recovery among SMEs. It hit a low in Q2 2020, when Singapore entered a partial lockdown termed as a "circuit-breaker" period, but subsequently showed three straight quarters of improvement.

Within industries, the recovery has been led by the healthcare and transport and storage sectors, which showed a rebound in the third and fourth quarters of 2020 respectively.

Particularly, the healthcare sector was buoyed by the strong demand for general healthcare and Covid-19 related supplies, according to OCBC.

The transport and storage sector, meanwhile, was supported by demand for domestic logistics arising from food deliveries and e-commerce during the pandemic.

Business services is the only sector among the six that OCBC tracks that has not fully recovered even in Q1 2021. This is as SMEs in consultancy, tourism and events continue to be affected by restrictions on travel, OCBC noted.

This sector, as well as construction and F&B (food and beverage) - which includes retail, are some that have yet to recover from the pandemic "in a convincing way" and which bear watching, said Linus Goh, OCBC's head of global commercial banking, at a media briefing on Wednesday.

"I think the sharp recovery from the low of Q2 2020 is evident now, but how sustainable that is, and whether some of the added pressures from things like the heightened restrictions on travel and labour would play into that, is something to look out for," Mr Goh added.

Still, Mr Goh believes that sentiment will remain strong for the next quarter, noting that the demand for loans is "quite positive".

In particular, the demand for loans now is more for business growth, a contrast to when businesses were borrowing a year ago in case of exigencies, he pointed out.

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