SMEs extremely downbeat about growth prospects in 2016

Profit expectations dropped to a record low.

Small and medium enterprises in Singapore are not hopeful that the new year will bring new opportunities for growth, according to the latest SBF-DP SME Index.

The Index fell to a score of 51.1 – the lowest level recorded since the Index hit 50.8 in the first half of 20121Q12-2Q12F. An Index reading of 50 indicates SMEs are neutral about their prospects and expect to achieve no substantial growth for the coming two quarters.

“We have had five challenging quarters that have dampened the outlook of Singapore SMEs. The feeling among SMEs is that there may be worse to come. The SBF-DP SME Index shows declining optimism across the board with weakness in all the six industries polled," said Lincoln Teo, Chief Operating Officer of DP Info.

Sentiment fell or remained neutral across all six industries, indicating a weakening outlook across the whole SME sector.

All major components that make up the Index recorded a lower reading, the first time since the Index was introduced in 2010. SMEs are less optimistic about all aspects of their operations – from hiring through to business expansion to capital investment.

The Profitability Outlook reading also fell to a new record low of 5.08. Five of the six industries indicated declining optimism for their profitability, while the outlook among Construction/Engineering SMEs remaining virtually unchanged.

"The sluggish global economy is definitely weighing down the outlook of SMEs. With the island’s industrial production falling and the consumer price index at its lowest in recent memory, demand is weak within the business and consumer space," Teo noted.

The Index measures the business sentiment of SMEs for the next six months and is a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info). Some 3,600 SMEs were interviewed.