SME business sentiment hits highest reading since start of pandemic

BUSINESS sentiment among small and medium-sized enterprises (SMEs) for the next six months is now just a notch below expansionary sentiments, the highest reading since Covid-19 pandemic began last year.

An SME index for April to September registered an overall reading of 49.9, up from the 48.2 of the previous quarter. A reading below 50 indicates contractionary sentiments.

The figure was derived from a survey of more than 2,100 local SMEs, conducted by the Singapore Business Federation (SBF) and global information-services company Experian between Jan 18 and Feb 26.

SMEs across all six sectors expressed improving business sentiments, SBF and Experian said in a joint statement on Wednesday.

The most significant gains were for internal-facing sectors such as construction and engineering, which rose 6.8 per cent to 51.8. Business services registered a 4.2 per cent increase to 50.

This is a reversal of the record-low business outlook last year, with a reading of just 46.3 for the survey conducted in Q3 last year, for the period between October to March. No data was collected in Q2 for the June-December outlook due to Singapore's "circuit breaker" or partial lockdown.

Lam Yi Young, chief executive of SBF, said: "The gradual reopening of our economy, the easing of business restrictions, and the wide range of Budget measures announced earlier this year have given a much-needed boost to the confidence of our SMEs.

"Many are looking forward to re-building their businesses after the devastating impact of the Covid-19 pandemic," he said, adding that SBF is also ramping up its efforts to help SMEs to position themselves for recovery and growth.

SMEs were also surveyed on their expectations in seven key areas: turnover, profitability, business expansion, capital investment, hiring, capacity utilisation and access to financing. All these areas recorded improvements.

In particular, SMEs are expecting an easing of their access to financing for the first time since Q2-Q3 2019; the score rose 11.59 per cent to 5.49.

James Gothard, general manager for credit services and strategy in South-east Asia at Experian, said this year is poised to be characterised by promising signs of a partial and gradual recovery, following an unprecedented recession last year.

"Overall, SMEs appear to be gradually relaxing the wait-and-see approach they had previously adopted as the uncertainty dominating the preceding quarters begin to recede," he said.

Even so, the economic recovery is at risk of derailed by a resurgence of Covid-19 cases or delays in vaccination, which could dash business confidence and trade activity, said the World Bank.

Mr Gothard said it remains important for SMEs to boost their overall resilience towards any unexpected shocks due to the ongoing downside risks.

"With government support schemes for SMEs continuing into 2021, SMEs will need to explore and invest in aspects such as manpower upskilling and digitalisation, both of which could help firms remain competitive and relevant in the long term," he said.