SINGAPORE (Apr 2): Fears are mounting among small and medium enterprises (SMEs), a segment which has been lauded as one of Singapore’s main economic drivers, as the Covid-19 pandemic escalates.
A quarterly survey conducted by the Singapore Business Federation (SBF) and Experian revealed that business optimism across some 3,000 SMEs from six sectors is at its lowest since 2009.
The SBF-Experian SME Index, which measures the business sentiment of SMEs in Singapore, comprises inputs from SMEs, registered an overall reading of 48.3 for the period of 2Q-3Q2020.
The six sectors surveyed include commerce, trading, construction and engineering, manufacturing, retail and F&B, business services, and transport and storage.
However, the SBF and Experian note in a joint statement that given the escalating and accelerating impact of the rapidly evolving Covid-19 outbreak on the global economy, SME sentiments are likely to have contracted even further.
The duo also highlight how all six sectors have registered readings below 50 for the first time since the index’s inception, signalling contractionary sentiments across the board.
“These are unprecedented times for the business community. We’re facing one of the worst outbreaks in history, unprecedented border closures of entire countries and growing uncertainty in the global financial markets,” says SBF CEO Ho Meng Kit.
“While the findings of the latest Index reflect the broader sentiments, expectations and realities of our SMEs on the ground, the situation has since worsened,” he adds.
Segmentally, the index saw the retail and F&B sector post the largest decrease in sentiment, while the manufacturing and commerce and trading sectors extended their negative profit growth streaks. The business services sector, too, registered a negative business outlook for the first time since index’s inception.
The survey also identified how overall business expansion sentiments booked a 3.61% decrease to 5.08 for the quarter. While the reading remained positive, it denoted yet another historical low in the index.
“This is likely to have been a result of Covid-19 outbreak compounding existing business woes stemming from the US-China trade tensions that have characterised the past two years,” say SBF and Experian.
Despite all the dampening news, the survey brought some encouraging news in the form of resilience in hiring expectations across the board, as well as within the business services and construction sectors.
“In view of the evolving Covid-19 situation, Singapore’s SMEs appear to be preparing to weather a sustained economic slowdown, putting expansion and investment plans on hold as downside risks materialise,” says James Gothard, Experian's general manager for credit services and strategy in Southeast Asia.
“We do expect a deeper contraction in SME sentiment in the coming days and weeks. 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,” he adds.
