Two in five businesses expect economy to worsen in the year ahead: SBF survey

[SINGAPORE] The business outlook has weakened considerably amid growing uncertainty, based on the latest quarterly Singapore Business Federation (SBF) survey released on Wednesday (May 28).

Some 40 per cent of respondents expect the economy to worsen in the next 12 months – nearly double the 22 per cent who thought so in Q4 2024, the National Business Survey 2025 - Singapore Budget Edition found.

This pessimism was shared by small and medium-sized enterprises – with 41 per cent expecting this, up from 23 per cent – and large companies, with 38 per cent expecting so, up from 18 per cent.

The survey received responses from 526 businesses across major sectors.

Most pessimistic were businesses in three domestic-facing sectors: hotels, restaurants and accommodations; health and social services; and retail trade.

The hotels, restaurants and accommodations sector had the lowest Business Sentiment Index (BSI) score of 52.2, compared to the overall BSI of 56.5. The BSI is a new indicator that consolidates key measures that capture business confidence.

The sector had the lowest revenue expectations, profitability expectations and planned capital investment. It was also least optimistic about the business expansion outlook and business growth confidence.

In the next six months, businesses expect cost pressures to rise, the survey found. The highest cost expectations were in real estate, which scored 78.4 on this indicator, and hotels, restaurants and accommodations, scoring 71.9.

Bright spots despite cautious overall sentiment

While overall sentiment is cautious, some sectors showed optimism.

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The banking and insurance as well as education sectors were the most optimistic, with BSI scores of 61.2 and 60.5, respectively. These two sectors had the highest revenue expectations.

Sectors with the highest profitability expectations were education, with a 60.8 score; real estate, with 60.4; and banking and insurance, with 59.1.

The business expansion outlook remained moderate at 61.6, indicating some optimism for growth – particularly for education, with a BSI score of 66.6, and banking and insurance with 65.6.

The hiring outlook score was 57.7, suggesting that businesses intend to maintain their workforce size.

Most optimistic about hiring were hotels, restaurants and accommodations; IT and related services; and education.

The survey also asked businesses for the most useful measures from Budget 2025. The top choice was the 50 per cent corporate income tax rebate, cited by 58 per cent of respondents.

This was followed by the enhancement of the Progressive Wage Credit Scheme, cited by 44 per cent, and the Central Provident Fund transition offset, cited by 37 per cent.

Strong transformation momentum, liquidity concerns

Transformation momentum remains strong as businesses are continuing to pursue long-term competitiveness, the survey found.

Kok Ping Soon, chief executive of SBF, said: “It is important that businesses stay the course in enterprise and workforce transformation by leveraging on the slew of government support.”

In the survey, the top enterprise transformation priorities were internationalisation and artificial intelligence development. For workforce transformation, the redesigned SkillsFuture Enterprise Credit and SkillsFuture Workforce Development Grant were the most preferred initiatives.

Liquidity was a key concern, with about a quarter of respondents facing a moderate to severe credit crunch. Of these, 35 per cent reported insufficient cash to operate for three to six months.

Businesses wanted greater government support for financing related programmes; more flexible repayment terms; and access to alternative financing.

Noting these concerns about the accessibility and cost of financing, Kok said SBF hopes to work with the government and financial institutions to better support businesses.

This is as some businesses may need larger financing lines and longer financing terms to weather the impact of US tariffs, he added.