SMEs mildly positive on prospects for rest of 2014

SINGAPORE — Small and medium-size enterprises (SMEs) in the Republic are positive on growth prospects for the rest of 2014, though mutedly so, according to the latest SBF-DP SME Index released today (July 16).

The index - a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info) - measures SME sentiments for the upcoming six months. The index for July to December 2014 rose by 0.5 points to 54.9; a score above 50 indicates that SMEs have a positive outlook for their business prospects.

The Index is based on 3,000 interviews with SME owners and managers, and the financial performance of SMEs. Five industry sectors are tracked – Business Services, Commerce/Trading, Construction/Engineering, Manufacturing, and Transport/Storage.

Two of the five sectors - Commerce/Trading (54.8, down from 55.2 in the Q2 index) and Business Services (54.8, down from 54.9) - indicated a slight dampening in outlook for the next six months.

PROFITABILITY EXPECTATIONS

Overall capital investment expectations rose to 5.49 from 5.43 last quarter, a rise registered across all sectors for the first time this year. “This is driven by the increasing uptakes of PIC grants and a concerted effort by SMEs to automate their processes,” SPF-DP said in its media release.

Overall turnover expectations also improved over the last quarter. Construction/Engineering was one of the two sectors to see a drop in turnover expectations, from 5.66 to 5.61.

With the latest round of increased foreign workers levies kicking in from July, firms will be further constrained in their ability to take on new projects, SBF-DP said, adding that continued manpower constraints faced by SMEs are likely to result in a less robust growth momentum.

Ms Chen Yew Nah, Managing Director of DP Info said “Overcoming the manpower challenge with a transformational shift in mindset is the key to SMEs’ future growth.”

HIRING EXPECTATIONS

Mr Ho Meng Kit, CEO of Singapore Business Federation, said that SMEs’ muted sentiments over the past two years were down to restructuring in light of the altered domestic economic landscape. “It is not negative but it is not in great positive territory either. Certainly this dampened sentiment is not reflective of the global economic situation with the recovery of the G3 markets and good expectations for growth in Asia. Clearly our SMEs are affected by the domestic constraints in Singapore.

“Meanwhile, the policy measures introduced by the Government for economic restructuring have not borne fruit yet but there are encouraging signs that they will, with SMEs tapping on incentives and investing in capital. SMEs need to move away from reactive correction to a more transformational approach to achieve robust and sustained growth. We urge Singapore SMEs to come to terms with their restructuring challenges and focus on rediscovering their drive for growth and expansion.”

Mr Ho called upon the Government to do more to help SMEs take on more or larger projects. “It is a positive sign that Budget 2014 saw commitment to nurturing tech start-ups in the IT sector through government procurement. Perhaps similar initiatives could be done to benefit more sectors,” he said.