SINGAPORE (THE BUSINESS TIMES) - The Singapore economy could blow past government forecasts to bring 2017's full-year gross domestic product (GDP) growth to between 3.4 per cent and 3.7 per cent, says the latest Business Times-Singapore University of Social Sciences (BT-SUSS) Business Climate Q3 survey.
This range is above and beyond the official forecast for GDP growth, which is expected to come in at the upper end of the 2 per cent to 3 per cent range for the year.
The BT-SUSS survey based its growth prediction on regression analyses from survey indicators over the years, and factored in its forecast of 3.5 per cent to 4.6 per cent growth for the fourth quarter of this year.
The poll, carried out between Sept 20 and Oct 17, collected responses from 164 firms across industries. It was led by consultants Chow Kit Boey and Chan Cheong Chiam.
Despite the better-than-expected economic forecast, firms said they remain cautious about their outlook for the next six months, although their Q3 performance had held steady from the quarter before.
Firms were as pessimistic in the latest survey as in Q2. The net balance for business prospects - that is, the difference between the percentage of respondents who expect better times and those who think they will fare worse - remained the same at -9 per cent.
A positive net balance suggests expansion, and a negative balance, a contraction.
Ms Chow said: "Firms have tended to be over pessimistic in recent years, largely because of frequent turbulence in the world, as well as much restructuring in the Singapore economy."
She added that this has been compounded by Singapore's slower growth rate in the past few years.
Business outlook was not the only indicator that remained in negative territory. The net balances for sales, profits and new orders all registered negative readings in Q3, with little change from the quarter before.
Sales weakened by four percentage points to -25 per cent, profits improved marginally by one percentage point to -38 per cent, and new orders fell by one percentage point to -26 per cent.
While Q3's overall performance and outlook did not differ much from the quarter before, the changes were more apparent when broken down further by the size and ownership of the businesses and by industry.
The survey found that the performance gap between large and small firms widened, with the exception in the area of business prospects.
Small firms improved by 16 percentage points in their outlook for the next six months, while large firms fell by one percentage point. On the whole, however, small firms were the worst performing group across all indicators.
Local firms outperformed foreign ones in terms of sales, profits and new orders, but are more pessimistic about the next six months.
Foreign firms showed great leaps in improvement in terms of new orders and business prospects, narrowing the gap between them and homegrown firms.
The manufacturing sector was the best performing sector in Q3 for the sixth consecutive quarter, with improvements in new orders and profits. Optimism over business prospects also went up two percentage points to 9 per cent, signalling continued growth in manufacturing output.
Ms Chow said that while manufacturing may slow down in terms of growth rate, it can still produce a larger output because of its higher base.
The rising price of oil could stimulate output in the marine & offshore engineering, petroleum & chemicals and precision engineering industries, she said.
"The combined effect could offset the expected slowdown in the electronics industry."
Respondents were also asked which countries offered the best business prospects in the next 12 months in their company's line of business.
China came in tops at 17 per cent, followed by Singapore at 14 per cent, and Indonesia at 12 per cent.
Just over half (55 per cent) of the 164 respondents are involved in overseas business. Despite strong calls by the government to go international, the survey found that domestic activities continued to strengthen in Q3, even as overseas activities weakened.
Large and foreign firms had better showings in Singapore than abroad during the quarter, while firms across the board were more optimistic about their business prospects here than overseas.
Ms Chow said one factor behind large and foreign firms' chalking up better results in Singapore than overseas could stem from Singapore having expanded faster in Q3 - at a relatively high rate of 4.6 per cent (according to advanced estimates) compared to other developed countries.
For the near future, the external environment is looking positive as China is maintaining a realistic growth rate with increased personal consumption. Japan and Germany have also reported healthier growth, she noted.
This bodes well for firms. Companies may still be cautious about the next six months, but Singapore's restructuring efforts in the past few years should start bearing fruit, with construction activities likely to pick up soon, said Ms Chow.
She added that the first half of the new year is likely to post stronger growth than a year ago.