Singapore, Wednesday, 19 January 2009 - With the global financial crisis rearing its head in the international and local economy, the Singapore Business Federation (SBF) today organized its second in a series of quarterly business outlook seminars to apprise members on the business outlook for 2009 and initiatives to help companies weather the downturn.
Prominent speakers from the business community shared their insights on local and regional economic trends that are likely to unfold in 2009, whilst SPRING Singapore provided a brief on the hands-on assistance that is being provided to small and medium-sized enterprises (SMEs) to help them access government's S$2.3 billion financing schemes. On its part, SBF elaborated on its FundsAssiat@EBIS programme to help members leverage the financing schemes and fast track their applications for loans with participating financial institutions.
Some 70 senior and middle management staff from the engineering, electronics, services and manufacturing sectors heard economists and finance industry experts including Mr. Kit Wei Zheng of Citigroup and Mr. Wong Sui Jau of IFast Financial provide their analysis on likely economic trends ahead, while Mr. Ernest Quek of Standard Chartered Bank, Mr. Samuel Neo of SPRING Singapore and Ms. Rita King of SBF informed participants how to leverage various government financial schemes during the recession.
The following trends and projections were unveiled at the seminar:
The Singapore economy is undergoing what is likely to be its most severe recession since independence and this has spilled over to the manufacturing and services sectors.
Singapore's diversified and open economy which has a small domestic market is likely to rebound quickly once the worst is over.
With the contraction of the manufacturing and services sector, Singapore's 1Q09 GDP growth could fall a record 6 to 8%. The government's current forecast for GDP growth in 2009 is at -2.8%, which is lower than the Asian Financial crisis in 1998 (-1.4%) and the 2001 recession (-2.4%).
The recession is likely to bottom out in mid 2009 with possible positive growth in Singapore in 4Q09
Unemployment rate is likely to peak at 4.5 to 5%.
Inflation may moderate in 2009 with lower oil prices and consumer demand, although there might be temporary deflation in 2009, depending on the development of the recession.
The recession and easing inflation may prompt aggressive monetary and fiscal policy. USD-SGD is expected to be at 1.60 by end 2Q09.
There may be corporate and personal income tax cuts based on trends in 1998 and 2001 recessions.
Asia's economic power is likely to rise with respect to the U.S given its stronger financial base, sound foreign reserves and less dependence on debt markets for working capital.
Regional markets in Hong Kong, Taiwan and South Korea are especially affected by the export slump and falling demand. The GDP growth of these countries in 2009 is expected to be 0 to -3%, +2.12% and -1% to 2% respectively.
China and Malaysia face similar challenges where China's export-related industries are badly affected, while Malaysia may depend more on its domestic market. Their 2009 GDP growth are expected to be +8% and +3.5%.
Thailand may continue to face political uncertainty, with its growth expected to range from 0.5 to 2.5%. Vietnam is shielded from the global recession given its smaller base and large domestic market. It is likely to grow 5% in 2009.
Financial Facilitator Programme
During the seminar, various participants voiced that they are facing difficulties getting bank loans as they are unable to meet collateral requirements. They are looking to banks to relax their criteria for new companies that show promise but do not have the proven track record.
Ms. Rita King, Senior Director, Capacity Building, SBF, informed participants that banks do not only look at collateral when approving a loan. They also consider other guarantees such as the soundness and experience of the management and whether it is in the position to use the loan and propel the business. It also looks at the viability of the business plan. She stressed the importance of having good financial advice and urged companies to consult a financial advisor for guidance when negotiating a loan with the banks.
Mr Teng Theng Dar, CEO of SBF, urged participants to put themselves in the banker's shoes. "It is the duty of a bank to assess risk, and in disbursing a loan to a company, it is stepping in to share the risk. If the company is under-capitalized and risks are present, the bank will be reluctant to lend. Companies need to put up a convincing case to show that their risk is low and the returns are healthy and sustainable," he added.
"There is a need to educate the bankers about your business and for the bankers to educate companies on their financial standing. The government does not intend to play the role of the bank. There needs to be a balance between risk taking and the returns; the final decision lies with the bank", said Mr Teng.
For an update on SBF programmes and activities, look up "Upcoming Events" on the SBF website, www.sbf.org.sg.