Small and Medium-sized Enterprises Positive about Business Outlook, Eyeing China’s Reopening
13:20 JST, February 2, 2023
Small and medium-sized enterprises (SMEs) in Singapore are generally positive about their business outlook in the near term, according to an index compiled by OCBC Bank that was launched on Jan. 19.
The index gave the business outlook for SMEs in the fourth quarter of 2022 an overall reading of 50.2 points, remaining slightly expansionary for the eighth consecutive quarter. This was a slight dip from 51.9 registered in the third quarter.
A reading above 50 indicates improved business health, while one below 50 suggests a deterioration relative to the same period a year earlier.
OCBC first released the index in 2021 and publishes the data after every quarter.
The bank, which serves around half the SMEs here, compiles the index from data supplied by over 100,000 companies each with up to $30 million in annual turnover.
The index is based on a composite of six indicators — collections, payments, cash flow, credit and debit transactions, and balances of OCBC’s SME customers.
According to the index, growth was mixed across industries.
Business services, building and construction, food and beverage, and manufacturing led the growth in the last quarter of 2022, while externally oriented sectors such as transport and logistics, wholesale trade, and information and communications technology (ICT) were dragged down by weaker global demand.
The weakening global economy and growing inflation dampened the performance of trade-dependent industries, the report noted.
The index is likely to stay unchanged within a narrow range or ease slightly in the first quarter of 2023 as global macro risks remain.
Mr. Linus Goh, head of global commercial banking in OCBC, said: “In the midst of growing macro headwinds, the OCBC SME Index remained expansionary for the eighth consecutive quarter in the fourth quarter 2022. SMEs are quite optimistic about the outlook for the first half of 2023 and are closely watching China’s reopening to guide expectations in the second half.”
The business services sector saw robust performance and was driven by expansion in the advertising and exhibition segments, due to the line-up of meetings, incentive travel, conventions and exhibitions in the fourth quarter.
The food and beverage sector also expanded steadily, benefiting from the continued rebound in international visitor arrivals and sustained domestic demand.
For the first time, OCBC also conducted an SME business outlook poll, aimed to understand how business owners fared in recent months, their business outlook, and key challenges they are likely to face in the next six months.
More than 2,000 responses were collected during the survey period of Nov. 28, 2022, to Jan. 4, 2023.
Based on the poll, SME owners were generally positive about the business outlook in the near term, ahead of Chinese New Year festivities.
Some 47% of the companies expected an improvement in their business over the first half of 2023, while 38% expected their performance to remain the same. Only 15% expected a decline. The SMEs with higher growth expectations were in business services, building and construction, education, and ICT.
In the poll, 27% of the business owners also said they expected manpower shortage to remain a major challenge.
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