SMEs maintaining cautious outlook, bank hopes on 2018 recovery
Reuters file photo
SINGAPORE — While large corporations saw signs of recovery in the latter half of last year, most small and medium enterprises (SMEs) here do not seem to have experienced an uplift, consistent with the still-guarded outlook expressed in recent surveys, the Monetary Authority of Singapore said in its Macroeconomic Review yesterday.
Agreeing with the observation, Mr Kurt Wee, president of the Association of Small and Medium Enterprises said the report correctly outlines the cautious sentiment of SMEs.
“We are hearing about SMEs experiencing lower revenue ranges and (their) costs are not abating,” he said. “We don’t foresee a turnaround to happen potentially until next year,” added Mr Wee.
However, he noted that some SMEs are seeing movement in their inventories. “Things are starting to stabilise … we think that this potentially could be a recovery from a bottoming-out situation.”
Mr Ho Meng Kit, CEO of the Singapore Business Federation (SBF) added that the caution from SMEs could be due to “mindset”. “Many of them are within the supply chains and may not have experienced the outcomes of the higher growth prospects yet.
“Many of our SMEs have substantial operations in Singapore and may feel that they are being squeezed by the manpower crunch, high cost of operations and ongoing restructuring. For example, the retail, and food and beverage sectors are also faced with structural issues.”
Mr Ho added that the latest SBF-DP Information Group SME Index for the second and third quarters of 2017 — a quarterly index that aims to provide a six-month business outlook of the SMEs in Singapore in relation to external economic conditions and developments — indicate that more SMEs are planning capital investments, which means that they are expecting growth in the longer term.
“This also indicates that SMEs are responding to the Government’s call for restructuring and investing in automation and innovation to create efficiency and grow their revenue streams,” said Mr Ho, referring to the Singapore Government’s push to upgrade SMEs through efforts to adopt new technologies and expand overseas.
The Government has put in place measures such as the SMEs Go Digital Programme, to assist SMEs in building their digital capabilities and raise productivity through improved work processes.
This would help SMEs to cope with cost challenges, said the MAS.
In its review yesterday, the MAS drew reference to the SBF-DP SME Index survey and noted that “in general”, SMEs were somewhat guarded about their growth prospects at the end of last year.
“While overall sentiment among them picked up slightly in the latest survey conducted between January and February this year, firms still expect to see a decline in revenue and profit over the next six months, albeit at a reduced pace,” the central bank said.
The MAS added that broadly, SMEs have been slightly underperforming compared with larger enterprises over the past few years.
An analysis of locally listed SMEs shows that the improvement in MNC revenues do generate some positive spillovers, but these SMEs that are listed on the Singapore Exchange account for less than one-tenth of a per cent of the 216,000 SMEs in Singapore, the MAS said.
The central bank noted that corporate profitability could improve more uniformly as overall economic growth becomes more entrenched.
