SINGAPORE - Smaller firms are scaling back expansion plans next year in the wake of lower expectations amid the trade war, a new survey noted.

It found that companies remain pessimistic about the first six months of 2020, with all six sectors polled - commerce and trading, construction and engineering, manufacturing, retail and food and beverage, business services, transport and storage - downgrading their expectations for business expansion.

The gloom is most apparent in industries that rely on exports given the uncertainties stemming from the trade war, although firms focused on the domestic market are not brimming over with good cheer either.

This comes as the Trade and Industry Ministry said last month that the economy is expected to grow by 0.5 per cent to 1 per cent this year and 0.5 per cent to 2.5 per cent next year.

Professor Lawrence Loh of the National University of Singapore Business School said: "While the broader outlook involving all companies is more favourable, small and medium-sized enterprises (SMEs) in particular face the brunt of changes more severely.

"They are sensitive to global fluctuations more than the larger well-resourced companies."

The quarterly survey by the Singapore Business Federation (SBF) and information services company Experian measures business sentiment among SMEs.

It polled around 3,600 SMEs between Oct 7 and Nov 15 and looked at seven key indicators: turnover, profitability, business expansion, capital investment, hiring, capacity utilisation and access to financing.

SBF chief executive Ho Meng Kit said on Monday (Dec 23): "It's important to note that the survey was done before the United States and China came to an agreement on a Phase One trade deal.

"While we hope for some stability, our companies must be prepared to grapple with continued uncertainties. It is therefore wise to take a watch-and-wait approach as the business environment in the first half of next year may continue to stay depressed."

The SBF noted that export segments like commerce and trading expect continued challenges as a result of the uncertain global economy.

SMEs in this sector may struggle to raise financing as lenders might be more cautious in extending credit to a high-risk industry that can be impacted by global headwinds, the SBF said.

It added: "With no apparent end in sight for the ongoing US-China trade war, this may suggest that SMEs in this sector are tempering their investment appetites, seeking to maximise the potential of existing resources."

But the trade war is also affecting domestic segments such as retail and food and beverage.

They registered the most significant decline in turnover expectations in the new survey, the SBF noted.

Mr James Gothard, Experian's general manager for credit services and strategy in South-east Asia, said: "Ongoing trade tensions have elevated uncertainties in the Asian business landscape, a development that is bound to impact export-oriented economies such as Singapore.

"Despite signs that the Singapore economy is improving, SMEs, especially in the commerce and trading and retail and food and beverage sectors, seem to be approaching the new year with caution, acknowledging the anticipated slow pace of the economy's recovery and risks arising from global uncertainties."

But manufacturing is a bright spot, registering improvements in nearly all indicators.

The SBF said the figures suggest that the sector may be seeing order books stabilising in the first half of 2020. It also registered an increase in hiring expectations, possibly suggesting that companies are anticipating a need for more manpower to handle volumes over 2020.

Mr Ho added: "With economic uncertainties and global headwinds (that are) now the new normal, our SMEs cannot afford to carry on with business as usual.

"They need to continue to explore new markets which may now be more accessible and attractive with new free-trade agreements (FTA) in place such as the EU-Singapore FTA and the anticipated signing of the Regional Comprehensive Economic Partnership next year.

"We urge our SMEs to continue to invest in business transformation efforts as well as the upskilling of their workers to boost productivity and strengthen their capabilities so they can be ready to ride on the recovery."