Services sector braces for weaker business environment in H2

Most segments, especially accommodation and real estate, are projecting demand to fall.

A majority of firms in the services sector are expecting business conditions to deteriorate in H2, an Economic Development Board (EDB) survey unveiled. About 40% of firms foresee slower business conditions, whilst 9% of firms are optimistic.

This results in a net weighted balance of 31% of firms predicting a less favourable business outlook in H2. Though the business outlook remains negative, the figure is more relaxed compared to the -58% recorded in Q2.

Firms in the accommodation industry expect a fall in demand for the next six months as they foresee low tourist arrivals due to global travel restrictions. Likewise, the real estate industry is projecting a less favourable business environment over the same period. Particularly, firms engaged in the rental of commercial and office premises foresee downward pressure on rental rates.

Similarly, the business services (excluding real estate) industry expects business conditions to worsen, with a net weighted balance of -42%. Travel agencies and event organisers are amongst those that expect business conditions to deteriorate.

The food and beverage (F&B) services and retail trade industries are also expecting the business situation to be less favourable for H2, with a net weighted balance of -32% and -24% respectively. However, EDB noted that these business sentiments have improved from the net weighted balance recorded in Q2 at -96% for F&B services and -84% for retailers.

Whilst F&B services establishments are able to provide dine-in services and retailers can open their physical stores during Phase 2 of re-opening, they still dread over not being able to fully operate amidst safe distancing measures.

Lastly, the information and communications industry also expects a weaker business environment. However, within the industry, firms in the software publishing segment (including firms engaged in games publishing) are optimistic in their business outlook.