Optimism about the economy has fallen across the board here but firms are reluctant to cut spending and staff numbers in case they lose their competitive edge, according to recent surveys.
A new poll of chief financial officers (CFOs) and other senior executives found that confidence about the country's economic performance is at a three-year low.
The poll by American Express and CFO Research found that 60 per cent of executives expect the economy to grow "modestly to substantially" this year, down from 70 per cent last year and 82 per cent in 2014.
And 24 per cent expect the economy to contract modestly. This is up from 13 per cent last year and 3 per cent in 2014, according to the report released yesterday.
The survey, conducted online, polled 651 senior finance and corporate executives from firms with revenues of more than US$500 million (S$691 million), in 15 countries last November. The largest declines in confidence were recorded in China, Hong Kong and Singapore, where 33 CFOs were surveyed.
Mr Nigel Fox, American Express' general manager of global corporate payments for Singapore, said yesterday: "Business leaders are citing possible changes to regulation and currency exchange rates as the most likely factors to slow their company's growth in 2016."
Another survey - the Singapore Commercial Credit Bureau's quarterly Business Optimism Index that was released late last month - forecast that business confidence will remain weak for the April to June quarter.
This follows from the first quarter, when the index found business confidence was at a three-year low.
Although firms are still planning to increase investment, Mr Fox noted that most of the respondents in their survey said they need to invest more just to remain competitive this year. This was different from last year: "These challenges indicate an immediate focus to defend their positions at home, marking a change from 2015, when the top goal was to enter new markets."
About 97 per cent of executives surveyed here expect to increase spending this year while the remaining 3 per cent are not planning any changes.
The survey found 75 per cent of business leaders will spend and invest more to remain competitive with other companies, up from 57 per cent last year. And 63 per cent will focus on entering new markets, down from 70 per cent last year. About 87 per cent of Singapore business leaders also expect to increase staff strength to support growth this year, while only 3 per cent are expecting a drop in headcount.
Mr Fox said: "Companies are looking for balance between caution in the face of uncertainty and the need to continue to pursue new opportunities. They say the two most important uses for their cash will be spending to ensure that their business is secure, and pursuing growth."