Three-quarters of businesses in Singapore don’t feel confident that the economy will improve in the next 12 months, compared to the 41% who felt confident a year before.
This weakening business sentiment was unveiled at the Singapore Business Federation’s (SBF) national business survey of 2023/2024, which laid out economic uncertainties, tightening credit, cost increases and manpower challenges as the environment for the new year.
The survey involved 1,056 companies, of which 82% were small and medium-sized enterprises (SMEs) and 18% were large companies, and was conducted from Sept 14 to Nov 12, 2023.
Notably, it found that more SMEs, 30%, compared to large companies, 22%, believe that the economy will worsen in the next 12 months. Businesses in the IT & professional services and manufacturing sectors have a more bearish outlook, while those in the construction & civil engineering, banking & insurance and logistics & transportation sectors are more optimistic about the economy in the next 12 months.
The top challenge faced by businesses was an increase in business cost, with manpower costs cited as a key factor at 75%, followed by cost pass-through from upstream suppliers, 58%, and higher utilities costs, 56%.
The construction & civil engineering and manufacturing sectors are the top sectors most impacted by the increase in business cost.
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More than 80% of businesses say that they have been impacted by interest rate hikes and increase in cost of funding in the past year, while about half of businesses faced a slight to severe credit crunch, with the proportion of those that do not have sufficient cash to operate increasing from 6% to 11%.
For manpower related challenges, the top sectors impacted by the changes in S pass qualifying salary are construction & civil engineering and manufacturing, while the top sectors impacted by the changes to EP qualifying salary are IT & professional services and banking & insurance.
However, SBF finds that despite cost challenges, businesses continue to invest in their workforce with 42% of businesses planning to increase employee salaries and 26% planning to expand headcount next year.
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Ahead of the upcoming Budget 2024, SBF finds that Singaporean businesses hope to see support in addressing cost and cash flow management challenges. Businesses would also like to have support in hiring/attracting, developing and retaining talent, says the release.
SBF’s CEO, Kok Ping Soon says: “It is no longer business-as-usual for companies as they navigate new challenges in an uncertain economic climate. Many are approaching 2024 with greater caution on the back of heightened cost pressures, tightening credit situation, continued manpower challenges and an unfavourable external environment."
