Jittery local SMEs gripped by economic recession fears

Persistent pessimism is “worrying”, experts say.

Small and medium business owners are losing sleep over fears of a full-blown recession in Singapore, particularly in light of sharp the sharp growth slowdown experienced by major trading partners such as China and Malaysia.

“The continuing decline in SME business sentiments is worrying. It is down for four consecutive quarters and is the lowest since 1Q 2013. 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,” said Ho Meng Kit, CEO of Singapore Business Federation (SBF).

Ho was referring to the latest SBF-DP SME Index, which fell to a three-year low of 51.9 in the fourth quarter of 2015.

“The lower turnover and profit expectations may lead to lower hiring expectations in the SME sector. As SMEs are our major employers contributing to 70% 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.

Three of the largest sectors in the Singapore economy - Construction/Engineering, Manufacturing and Commerce/Trading – all reported a drop in optimism for the next two quarters. The reasons for the decline in sentiment appear to vary across the industries.

Construction/Engineering SMEs will be influenced by the weakening of residential property prices and limited opportunities in the commercial and industrial property sectors.

Commerce/Trading companies will be weighing up the impact of the weaker demand across the global economy, currency volatility among Singapore’s regional trading partners, as well as the impact of a strong Singapore dollar.

Manufacturing companies will also be influenced by the relative strength of the Singapore dollar as well as responding to the ongoing push to improve productivity and reduce their reliance on foreign labour.