SME business sentiment rises cautiously to neutral levels

Negative sentiment is expected to ease across all business sectors over the next six months.

SME business sentiment has neared neutral levels, with a reading of 49.9, according to the latest Singapore Business Federation (SBF)-Experian SME Index.

An index reading of 50 represents a neutral outlook for the next six months. A reading of above 50 indicates a positive, expansionary and outlook, whilst a reading below 50 indicates a contractionary and negative outlook.

This first quarter results is the highest reading since the 50.4 recorded in the first quarter of last year, before the onset of the pandemic.

"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 keepingan eye on futurebusiness opportunities," said James Gothard, General Manager, Credit Services & Strategy, Southeast Asia, Experian.

SMEs across all six sectors polled had an easing in their negative business sentiment. The Construction/Engineering sector logged a positive 51.8 reading, followed by a flat 50.0 from the Business Services sector. Both Manufacturing and Transport/Storage sectors had a slightly negative reading of 49.9, followed by the 49.8 and 47.2 readings from the Commerce/Trading and Retain/F&B sectors respectively.

However, downside risks remain as the pandemic continues, with SMEs bracing for further unexpected shocks.

"Due to ongoing downside risks posed by COVID-19,it will remain important for SMEs to boost their overall resiliency towards any unexpected shocks to the global economy. 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," Gothard added.

SBF CEO Lam Yi Young, for his part, attributed this recovery to the gradual reopening of the economy,e asing of business restrictions, and government measures.

"The gradual reopening of our economy,the easing of business restrictions,andthe wide range of Budget measures announced earlier this year have given a much-needed boost tothe confidence ofour SMEs. Many are looking forward tore-building their businessesafter the devastating impact of the COVID-19 pandemic," he said.

The survey was conducted between January 18 to February 26, with a respondent pool of 2100 SMEs.

The survey looks into the qualitative indicators of profitability, business expansion, capital investment, hiring, capacity utilisation, access to financing, and turnover.