Smaller business owners are feeling gloomier than at any time in almost three years, amid weak export demand and fears of a recession.
The SBF-DP SME Index, which is reported quarterly but asks business owners' for their outlook over the next six months, has fallen to 51.9. That is the fourth straight quarter of decline and the lowest reading since the first quarter of 2013, when the euro zone debt crisis was at its height.
About 3,600 small and medium-sized enterprise (SMEs) were interviewed for the index, which is compiled by the Singapore Business Federation (SBF) and research firm DP Information Group.
Three of Singapore's major industries - commerce and trading, construction and engineering and manufacturing - showed a significant decline in sentiment.
The sharp falls in these segments outweighed the increase in optimism among the retail and food and beverage, business services and transport and storage sectors.
What was consistent across all sectors, however, was a decline in expectations over turnover and profitability.
Turnover expectations fell from 5.55 in the last quarter to 5.38 this quarter, while profitability expectations dropped from 5.44 to 5.26 in the same period.
All industries but one said they had lower expectations with regard to business expansion over the next six months.
Sentiment stayed the same in commerce and trading.
"The continuing decline in SME business sentiments is worrying," said the SBF's chief executive Ho Meng Kit.
"With global demand for our goods and services remaining weak and Singapore's top two trading partners, China and Malaysia, going through a bad patch, the Singapore economy could be hovering on the edge of recession. Our economy and businesses, particularly SMEs, will be impacted."
Economists are warning of a possible technical recession here as recent economic data on exports and factory activity have been disappointing. The lower turnover and profit expectations may lead to lower hiring expectations in the SME sector too, Mr Ho added.
"As SMEs are our major employers, contributing to 70 per cent of jobs, this could in turn lead to a further slowdown in job creation.
"We need to closely monitor the well-being of the SME sector as it undergoes restructuring to increase productivity and build capabilities in this more difficult environment," he said.
The slowdown in China's economy and a sudden move by regulators to devalue the yuan, which caused volatile movements in regional currencies, have had a harsh impact on SMEs, noted Mr Lincoln Teo, the chief operating officer of DP Information Group.
"Domestically, the strong Singapore dollar and lower tourist arrivals have also added on to the reasons as to why SMEs are feeling nervous," he added.
Still, the fall in the index does not mean SMEs are all doom and gloom, he said, noting that expectations for capital investments have remained stable.
"This shows SMEs... are still making investments in technology and equipment that may point towards planning for future growth in the next six months and beyond."