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Business outlook of SMEs in Singapore falls to a 3-year low

  • Weaker sales and profits forecasted for the next six months in all industries
  • Lower business expansion and hiring expectations


9 September 2015 [Singapore] – Sentiments among SMEs in Singapore continue to decline with the SBF-DP SME Index (the Index) recording an all-time low in three years.

SME optimism has fallen every quarter this year dragging the Index reading to a three-year low of 51.9. This is the lowest recorded score since the first quarter of 2013 when it registered 51.6 based on companies polled in Q4 2012. Not since the Eurozone debt crisis has the index dropped to the lowest level.

A joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info) since 2010, the Index measures the business sentiment of SMEs for the next six months. Some 3,600 SMEs were interviewed.

There has been a significant decline in the outlook of three of Singapore’s major industries – Commerce/Trading, Construction/Engineering and Manufacturing. The fall in these three sectors outweighed the slight increase in optimism among the Retail/F&B, Business Services and Transport/Storage sectors.

Outlook for 4Q15 – 1Q16F (September 2015 to March 2016)

One consistent feature across all six industries is the decline in both Turnover and Profitability Expectations in the final quarter of 2015. 

Turnover Expectations is down from a score of 5.55 last quarter to 5.38 this quarter, while Profitability Expectations is down from 5.44 to 5.26 during the same period.

Business Expansion Expectations has also dipped to 5.83 this quarter from 5.94 last quarter. Every industry reported lower Business Expansion expectations, except the Commerce/Trading sector where the index score remained unchanged.

“The continuing decline in SME business sentiments is worrying. It is down for four consecutive quarters and is the lowest since 1Q 2013. With global demand for our goods and services remaining weak and Singapore’s top two trading partners, China and Malaysia going through a bad patch, the Singapore economy could be hovering on the edge of recession. Our economy and businesses, particularly SMEs, will be impacted.

The lower turnover and profit expectations may lead to lower hiring expectations in the SME sector. As SMEs are our major employers contributing to 70% of jobs, this could in turn lead to a further slowdown in job creation. We need to closely monitor the well-being of the SME sector as it undergoes restructuring to increase productivity and build capabilities in this more difficult environment,” said Mr Ho Meng Kit, CEO of SBF.

Over the past few months, business owners are greeted with the spectre of growth moderation in China.  The second largest economy globally has long been seen as the driver for many South East Asian economies. But the weakening pace of expansion, already pushing down commodity prices, has also come to bear on currencies in the region.

Mr Lincoln Teo, Chief Operating Officer of DP Info said “Coupled with the sudden decision to devalue the Renminbi, these changes have started weighing on the minds of SME owners and managers. Domestically, the strong Singapore dollar and lower tourist arrivals have also added on to the reasons as to why SMEs are feeling nervous.”

“The fall in the Index does not mean SMEs are facing a doom and gloom scenario.  What it does indicate is that SMEs expect their rate of sales and profit growth to be slow.”

“A visible resilience within the survey could be seen from that Capital Investment Expectations have remained stable at a score of 5.33. This shows SMEs, in consolidation phase, are still making investments in technology and equipment that may point towards planning for future growth in the next six months and beyond,” Mr Teo said.



Three of the largest sectors in the Singapore economy - Construction/Engineering, Manufacturing and Commerce/Trading – all reported a drop in optimism for the next two quarters. The reasons for the decline in sentiment appear to vary across the industries.

Construction/Engineering SMEs will be influenced by the weakening of residential property prices and limited opportunities in the commercial and industrial property sectors. 

Commerce/Trading companies will be weighing up the impact of the weaker demand across the global economy, currency volatility among Singapore’s regional trading partners, as well as the impact of a strong Singapore dollar.

Manufacturing companies will also be influenced by the relative strength of the Singapore dollar as well as responding to the ongoing push to improve productivity and reduce their reliance on foreign labour.

Table 1: Outlook for September 2015 - March 2016

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