SINGAPORE - Singapore's small and medium-sized enterprises (SMEs) have mostly recovered from the depths of last year's Covid-19-induced slump, according to an index compiled by OCBC Bank and launched on Wednesday (May 5).
This is the first time that the OCBC SME Index has turned expansionary, exceeding 50, since the pandemic began a year ago. The bank has back-tested the index with data that goes as far back as 2013.
The broad-based recovery was led by local SMEs in the healthcare and transport and storage sectors, OCBC said on Wednesday.
However, challenges remain for a sustained recovery with the constraints on foreign labour supply and restrictions on travel following a surge in Covid-19 cases in India, the bank noted.
While the index is likely to show a big jump in the second quarter, due mainly to the low base set in the April to June period of last year, the re-imposition of tighter measures to guard against a recent upsurge of Covid-19 infections here may limit the gains, said Mr Linus Goh, head of OCBC's global commercial banking, in a hybrid media briefing.
"A sharp recovery from the low of last year's second quarter is evident now. But how sustainable that will be depends on the added pressures that may come from the heightened restrictions and how they will play into the economy," he said.
The OCBC SME Index rose to 51.2 points for the first quarter of 2021 from 49.1 in the previous three months, building on three straight quarters of improvement since hitting a low in the second quarter of 2020, when Singapore's circuit breaker period began.
SMEs in the healthcare and transport and storage sectors started to recover in the third quarter of 2020, and remained above the 50-point level in the subsequent quarters.
Still, SMEs in the construction and food and beverage industries continue to be vulnerable to Covid-19 restrictions on travel and foreign labour supply, limiting the pace of their recovery in the last three quarters.
Building and construction was bolstered by property sales because of improving sentiments in the real estate market and the gradual recovery in demand for construction and building materials, with the resumption of construction projects in the second half of last year.
Business services remained muted at 49.1 in the first quarter of this year as SMEs in consultancy, tourism and events management continue to be affected by the restrictions on travel.
OCBC said its SME Index is a high-frequency index that is derived using the SME transaction data of more than 100,000 OCBC customers in Singapore with annual sales turnover of up to $30 million.
It said the index is the first data-driven SME-focused index in Singapore, providing a barometer of SME business health and performance. The index is derived from a composite of indicators, including collections, payments, cash flow and operating transactions of the SMEs with OCBC.
SMEs account for 43 per cent of Singapore's nominal value added to the economy, 70 per cent of employment and represent 99 per cent of all enterprises in 2020, according to data from the Department of Statistics.
OCBC's Mr Goh said the index will help track the progress of SMEs as they emerge from the Covid-19 pandemic and navigate the disruptions and opportunities in digitalisation, industry transformation and the shift to sustainability.
"With the OCBC SME Index, we have identified and measured the extent of emerging green shoots both in industries and parts of the value chain, allowing us to engage customers in a timely and more meaningful way, providing businesses with relevant support," he said.