SME business sentiment sinks to survey's all-time low on coronavirus uncertainties

All six sectors surveyed had negative outlooks. ST PHOTO: LIM YAOHUI

SINGAPORE - The business outlook of Singapore's small and medium-sized enterprises (SMEs) has plunged and will deteriorate further from the coronavirus pandemic and the global economic slowdown triggered, going by a quarterly industry survey released on Thursday (April 2)

The latest SBF-Experian SME Index, a joint initiative of the Singapore Business Federation (SBF) and information services company Experian, saw its overall reading of business sentiment for the next six months sink from 50.4 three months ago to 48.3, the lowest since the index's inception in 2009.

The index is based on a survey of more than 3,000 SMEs, conducted between Jan 13 and Feb 28, thus reflecting sentiments at the early start of the outbreak's repercussions on the Singapore economy. These sentiments are likely to have deteriorated further given the escalating fallout from the spreading outbreak on the global economy, said the report.

SBF CEO 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. 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 SME Index, all six sectors surveyed had negative outlooks.

SMEs in the retail and food and beverage sector felt the biggest drop in sentiment, while business services turned pessimistic on 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.

However, expectations around business expansion, capital investment, and hiring remain positive, suggesting that SMEs are adopting a wait-and-see approach to address the economic fallout from the ongoing virus outbreak, said the report.

"In view of the evolving Covid-19 situation, 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 James Gothard, Experian's general manager, credit services & strategy, Southeast Asia.

He noted that unlike the 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 a slew of Budget measures amounting to over $55 billion in economic stimulus for the economy.

Said Mr Ho: "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 SBF, together with the other trade associations and chambers, will continue to work closely together with the Government to help our companies navigate the various schemes, ensuring that the benefits flow down to them fast.

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 the SBF-YBLN HOPE Fund which provides an additional source of accessible and affordable funding.

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