Singapore SME business sentiment highest since pandemic began, with more hiring expected: Survey

With the easing of business restrictions, most small and medium-sized enterprises are also anticipating a rebound in sales over the next six months.
With the easing of business restrictions, most small and medium-sized enterprises are also anticipating a rebound in sales over the next six months.PHOTO: ST FILE

SINGAPORE - Business sentiment among small and medium-sized enterprises (SMEs) is at its highest since the Covid-19 pandemic began, with firms looking beyond survival to seize new opportunities, according to a survey out on Wednesday (April 7).

The survey, conducted between Jan 18 and Feb 26, polled more than 2,100 local SMEs. The sentiment index for the second to third quarter of this year hit 49.9, an increase over the 48.2 in the previous quarter.

This is the highest reading since the start of the Covid-19 pandemic in the first quarter of 2020, though economic recovery remains gradual and uneven across sectors.

Compiled by the Singapore Business Federation (SBF) and Experian, the index covers firms across six key sectors and gauges their outlook for the next six months till September.

A reading of 50 means that firms are neutral regarding their prospects ahead, while anything above 50 means that firms are positive for the next six months, expecting to expand. But a reading below 50 means that firms expect their business activities to contract.

SBF chief executive Lam Yi Young said: "This second consecutive improvement in the reading of the quarterly index shows that business sentiments among SMEs are on the rise.

"The gradual reopening of our economy, the easing of business restrictions, and the wide range of Budget measures announced earlier this year have given a much-needed boost to the confidence of our SMEs."

The six sectors polled were commerce and trading, construction and engineering, manufacturing, retail and food and beverage, business services, and transport and storage.

Firms in internal-facing sectors such as construction and engineering saw the biggest leap in outlook.

"This is likely due to the easing of Covid-19 restrictions, which has enabled the resumption of business activities on a broader scale," SBF said.

SMEs registered improvements across all seven indicators used to compile the index - turnover, profitability, business expansion, capital investment, hiring, capacity utilisation, and access to financing.

Most notably, they are expecting an easing of their access to financing for the first time since the second to third quarter of 2019.

With the easing of business restrictions, most SMEs are also anticipating a rebound in sales over the next six months, SBF noted.

With changed work processes and practices for firms, such as remote working on a broad scale, firms also increased their capital investment expectations.

They might also be exploring opportunities delayed by the pandemic, SBF said. To support business expansion, hiring expectations also rose.

"The ongoing economic recovery and availability of various government support measures may also have boosted the ability of SMEs to replace and bolster their workforce," SBF added.

Notably, the battered construction and engineering sector is in recovery, it noted, with a sharp rebound likely due to the resumption of work after the lengthy work stoppages and delays arising from the circuit breaker and extended dormitory quarantines in 2020.

Mr James Gothard, Experian general manager for credit services and strategy for South-east Asia, said: "Following an unprecedented contraction of the Singapore economy in 2020, this year is poised to be characterised by promising signs of a partial and gradual recovery.

"While SMEs remain cautious in the near term, many are keeping an eye on future business opportunities. This is evidenced by the improved, but still contractionary expectations surrounding turnover and profitability, while sentiments around business expansion, hiring and capital investment have turned slightly positive."

He added that overall, SMEs appear to be gradually relaxing the wait-and-see approach they had previously adopted as the uncertainty dominating preceding quarters begin to recede.

But he warned that the pandemic still poses ongoing downside risks.

"It will remain important for SMEs to boost their overall resiliency towards any unexpected shocks to the global economy," he said.

"With government support schemes for SMEs continuing into 2021, SMEs will need to explore and invest in aspects such as manpower upskilling and digitalisation, both of which could help firms remain competitive and relevant in the long term."

SBF's Mr Lam said: "Many are looking forward to rebuilding their businesses after the devastating impact of the Covid-19 pandemic. SBF is also revving up our efforts to support our SMEs with guided assistance and to help them position for recovery and growth."