About 29 per cent of small businesses in Singapore expect to increase employee numbers this year, a higher proportion than the 20 per cent of respondents who said they added headcount last year.

The finding comes even as the survey showed that these same businesses have low expectations for growth this year compared to other markets in the region.

Singapore ranked seventh out of the eight markets surveyed, with 51 per cent of respondents reporting that they expect their business to grow in the next 12 months. This was higher than Australia but well below Indonesia and Vietnam.

The survey was conducted by CPA Australia, one of the world's largest accounting bodies.

CPA Australia chief executive Alex Malley said the surprising optimism around employment may be reflective of small businesses believing the negative outlook for growth could be short term.

"Small businesses reporting a positive outlook in hiring intentions may indicate a belief that stronger economic conditions could start to emerge in the latter half of 2017," he said.

The CPA Australia Asia-Pacific Small Business Survey provides annual insights into the views of small businesses across eight markets in the region. This is the seventh year the research has been conducted.

Other results show that Singa- pore's small business sector has a relatively strong focus on the digital economy, especially in comparison to Australia and New Zealand, with 40 per cent of small businesses earning more than 10 per cent of their income from online sales and 74 per cent using social media for business purposes.

However, Singapore was ranked below the survey average on innovation, growing revenue from exports, the use of social media and e-commerce.

The differences in results reflect both the differing challenges for mature versus developing economies, and an uncertain global environment.

"Singapore's results should be considered in context of its status as an open, developed and trade-dependent economy," Mr Malley said.

"We would not expect to see the very strong growth reported in developing economies in Asia to be replicated in an advanced economy like Singapore."

The survey also shows that only 40 per cent of small businesses forecast Singapore's economy will grow next year. This has fallen from 48 per cent in last year's survey.

"Small business confidence is particularly sensitive to confidence in the performance of the economy more broadly," Mr Malley said.

"Singapore finds itself facing the economic growth challenges shared by many other advanced economies. However the building blocks for improvement are there with the Singapore Government having a strong record of introducing measures designed to support the small business sector," he said.

Singapore's small businesses reported facing a number of challenges - with increasing costs, increasing competition and a poor overall economic environment being the issues Singaporean businesses are most likely to believe are barriers to their growth.

On what costs are considered most detrimental to their business, Singaporean businesses were most likely to nominate staff costs followed by rent.

In spite of the current challenges, 24 per cent of the small businesses remain focused on improving their strategy, a result consistent with last year. Effective strategy is essential for sustainable long-term growth.

"Singapore's low tax rate, highly educated workforce and strong linkages to the fast-growing economies of the region continue to make it an attractive place to do business," Mr Malley said.

"With the release of the Committee on the Future Economy report due shortly, the Government is showing its proactive attitude to repositioning and growing Singa- pore's economy for the years ahead," he added.