The business sentiment of Singapore's small and medium-sized enterprises (SMEs) has plunged and will slide further due to the coronavirus pandemic and the ensuing global economic slowdown, going by a quarterly industry survey released yesterday.
The latest SBF-Experian SME Index, a joint initiative of the Singapore Business Federation (SBF) and information services company Experian, saw the overall reading of business sentiment for the next six months sink from 50.4 three months ago to 48.3.
This is the lowest since the index's inception in 2009.
The index is based on a survey of more than 3,000 SMEs that was conducted between Jan 13 and Feb 28, thus reflecting sentiments at the start of the outbreak's repercussions on the Singapore economy.
These sentiments are likely to have deteriorated further, given the impact of the escalating fallout from the outbreak on the global economy, said the report.
SBF chief executive Ho Meng Kit said 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," he noted.
"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."
A reading above 50 in the index indicates that companies expect business to improve in the next six months, while a reading below 50 indicates that they expect lower business activity.
For the first time since the inception of the index, all six sectors surveyed had negative outlooks.
SMEs in the retail and food and beverage (F&B) sector had the biggest drop in sentiment, while business services turned pessimistic in outlook for the first time since the start of the index.
The index registers SMEs' expectations in seven areas - turnover, profitability, business expansion, capital investment, hiring, capacity utilisation and access to financing.
Six out of seven areas saw declining expectations, with significant dips seen in turnover, profitability and access to financing.
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.
MR JAMES GOTHARD, Experian's general manager, credit services and strategy, South-east Asia.
However, expectations for business expansion, capital investment and hiring remain positive.
This suggests that SMEs are adopting a wait-and-see approach to addressing the economic fallout from the coronavirus outbreak, said the report.
"Singapore's SMEs appear to be preparing to weather a sustained economic slowdown, putting expansion and investment plans on hold as downside risks materialise," said Mr James Gothard, Experian's general manager, credit services and strategy, South-east Asia.
He noted that unlike in preceding quarters, domestic-facing sectors such as retail and F&B have sustained significant impact, and will likely face worse with increasing travel restrictions.
For external-facing sectors such as manufacturing, the risks remain as a result of big disruptions to global supply chains, impacting the flow of goods and people, he said.
"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 added.
With Singapore facing a recession here and globally, the Government has announced Budget measures amounting to over $55 billion in economic stimulus.
Mr Ho said: "We urge our companies to make full use of these measures not only to ride out the crisis with confidence in the near to medium term, but also to relook their business strategy and retrain and retain their workers to prepare for the eventual recovery."
He added that the SBF, together with trade associations and chambers, will continue to work closely with the Government to help companies here navigate the various schemes, ensuring that the benefits flow down to them fast.
The SBF will also continue to support businesses through various initiatives, including the SBF ManpowerConnect scheme to help with the manpower needs of companies, as well as a fund which provides an additional source of accessible and affordable funding.