Apr 2020 | News |
  • SME business optimism across all sectors surveyed have declined for the period 2Q20 – 3Q20F, largely due to uncertainties arising from the COVID-19 outbreak
  • Domestic facing sectors such as Retail / F&B have been significantly impacted following travel restrictions and a reduction in social activities
  • External facing sectors continue a sustained downward trend that began with the US-China trade war, compounded this quarter by disruptions to global supply chains as a result of COVID-19 related circumstances
  • The Business Services and Construction sectors remain resilient, with relatively limited impact to its SMEs in comparison to other sectors

SINGAPORE, 02 April 2020 – The global spread of the COVID-19 virus has precipitated a global economic slowdown and Singapore’s SMEs are feeling the pressure. The SBF-Experian SME Index for 2Q20 – 3Q20F registered an overall reading of 48.3, the lowest reading since the inception of the SME Index (“the Index”) in 2009.


The findings are based on a survey of more than 3,000 SMEs, conducted between 13 January to 28 February, reflecting the sentiments at the early start of the pandemic’s repercussions on the Singapore economy. Given the escalating and accelerating impact of the rapidly evolving COVID-19 outbreak on the global economy, SME sentiments are likely to have contracted further.


The COVID-19 outbreak has significantly impacted China’s economy following an unprecedented lockdown aimed at containing the virus’ spread. China’s official PMI reading of 35.7 in February 2020 was the lowest on record, a significant decrease from a reading of 50.0 in January 2020. The Ministry of Trade and Industry (MTI) noted that these developments may lead to supply chain disruptions, and a fall in tourist arrivals from China which can impact domestic demand. MTI downgraded Singapore’s 2020 GDP growth forecast to -0.5% to 1.5% as a result in February 2020. Recent developments in the COVID-19 outbreak have led to MTI to revise the GDP forecast downwards again to -4.0% to -1.0% for the full year. This comes on the back of advance 1Q20 GDP estimates indicating a 2.2% contraction for the local economy on a year-on-year basis. This marks the first time the economy has contracted since 2Q09 during the Global Financial Crisis. The International Monetary Fund has declared a global recession.


The Index – a joint initiative of the Singapore Business Federation (SBF) and Experian – measures the business sentiment of SMEs in Singapore for the next six months (April 2020 to September 2020). The Index comprises inputs from SMEs on their expectations in seven key areas – Turnover, Profitability, Business Expansion, Capital Investment, Hiring, Capacity Utilisation, and Access to Financing.


Outlook for 2Q20 – 3Q20F (April 2020 to September 2020)

[Note: Survey Period: 13/01/2020 to 28/02/2020]



Optimism among SMEs for the period 2Q20 – 3Q20F have declined following the COVID-19 outbreak. For the first time since the inception of the SME Index, all six sectors surveyed (Commerce / Trading, Construction / Engineering, Manufacturing, Retail / F&B, Business Services, Transport / Storage) have registered readings below 50, signalling contractionary sentiments across the board.


The Retail / F&B sector posted the largest decrease in sentiment among sectors surveyed, while the Manufacturing and Commerce / Trading sector extended its negative profit growth streak. Business Services also registered a negative business outlook for the first time since the start of the SME Index.


Expectations also declined across six out of seven indicators tracked, with significant dips seen in Turnover Expectations (from 5.09 to 4.47), Profitability Expectations (from 5.00 to 4.39), and Access to Financing Expectations (from 5.00 to 4.58). However, expectations around Business Expansion, Capital Investment, and Hiring remain positive, suggesting that SMEs are adopting a wait-and-see approach to address the economic fallout from the ongoing COVID-19 outbreak.


Impact of COVID-19 Economic Fallout on Retail / F&B SMEs

The COVID-19 outbreak is expected to have the most direct impact on domestic consumption, with locally driven sectors such as Retail / F&B seeing decreases across all six qualitative indicators. Travel restrictions implemented in the wake of the outbreak have also led to a sharp fall in tourist arrivals while locals reduce social activities out of caution – developments that will adversely impact SMEs in Retail / F&B.


This double negative impact to retail and F&B demand could have led to Turnover Expectations among SMEs in the sector recording a sharp fall from the previous quarter (down 21.48% to 4.02). With overheads expected to remain despite tepid sales, this could also have contributed to declining Profitability Expectations within the segment which registered a reading of 3.93 (down 22.02% from 5.04).


To mitigate the impact to business, the Singapore government has extended support in the form of the Unity Budget and the Resilience Budget aimed at helping SMEs tide over this challenging period. The Jobs Support Scheme, first introduced in the Unity Budget, has been enhanced to help employers by paying 25% on the first $4,600 of monthly salaries, up from 8% on the first $3,600 previously; the scheme will also be for 9 months till end 2020, up from 3 months previously. Property tax rebates have been expanded in the Resilience Budget to include more property types. The National Environment Agency (NEA) will be waiving up to three months of rental for stallholders in NEA-managed hawker centres and markets, while other government agencies such as the Housing and Development Board (HDB) will also offer up to two months’ rental waiver to its commercial tenants. Additionally, all government fees and charges will be frozen for one year.


SMEs Cautious about Expansion and Investment

Budget 2020 introduced supporting measures such as the Enterprise Grow Package and an enhanced Market Readiness Assistance Grant to help SMEs continue growth aspirations. However, with the COVID-19 outbreak increasing uncertainties around profitability and cash flow, SMEs are focused on near-term stabilisation, and are treading with caution with regards to expansion and capital investments.


Overall Business Expansion sentiments registered a 3.61% decrease to 5.08 this quarter. While the reading remains positive, it is the lowest in the history of the Index. This is likely to have been a result of COVID-19 outbreak compounding existing business woes stemming from the US-China trade tensions that have characterised the past two years.


SMEs in Retail / F&B bore the worst of the downturn, with Business Expansion outlook turning flat over the quarter (down 7.92% to 5.00). This has led to low investment appetites within the sector, with Capital Investment Expectations similarly turning neutral (down 4.58% to 5.00). This can likely be attributed to SMEs’ anticipation of negative profit growth caused by low domestic demand over a sustained period.


While the Resilience Budget provided further support through enhancements to the SMEs Go Digital Programme, the Productivity Solutions Grant (PSG) and the Enterprise Development Grant (EDG), closer monitoring will be needed to see the impact of these new measures on SME sentiment.


External-Facing SMEs Continue to Face Pressure from Global Economy

Regional quarantine orders and travel restrictions have disrupted global supply chains, placing pressure on SMEs in the Manufacturing and Transport / Storage sectors.


The Manufacturing sector largely reversed improvements made in the preceding quarter, registering declines across all seven indicators. Significant decreases were observed in Turnover Expectations (down 7.98% to 4.61) and Profitability Expectations (down 7.19% to 4.52). Similarly, the Transport / Storage sector saw declines across six of the seven indicators tracked for this segment. Turnover sentiments fell 13.65% to 4.49, while Profitability Expectations decreased 16.15% to 4.31.


SMEs in the Commerce / Trading sectors have also registered declines in Turnover Expectations (down 8.70% to 4.41), continuing a downward trend triggered by US-China trade tensions that had defined previous quarters. Uncertainties in the global economy has also impacted Profitability Expectations for the sector, which recorded a decrease of 8.00% to 4.37. These findings also mean that the Commerce / Trading and Manufacturing segments have extended their negative Profitability Expectations streak to six and seven straight quarters respectively.


With authorities around the world likely to implement additional restrictions as the virus continues to spread, SMEs in these sectors may remain concerned about growth prospects in the near to medium term. This is evidenced by Ability to Access Financing being particularly restricted for the Transport / Storage and Manufacturing sectors, suggesting that lenders remain cautious in extending credit to SMEs in these sectors.


Budget measures to alleviate SME credit concerns were introduced, such as the enhancements made to the Enterprise Financing Scheme (EFS) – SME Working Capital Loan and the Temporary Bridging Loan Programme (TBLP), while the Singapore government is also working with participating financial institutions to defer capital payments for one year on the EFS-SME Working Capital Loan and the TBLP loans if requested by businesses, subject to assessment. The Monetary Authority of Singapore and the financial industry have also collaborated on a package of measures to help SMEs and individuals facing temporary cashflow difficulties. This includes low-cost funding through a new MAS-Sing dollar facility for loans granted under Enterprise Singapore’s SME Working Capital Loan scheme and the Temporary Bridging Loan Programme.


Resilience Observed in Hiring Expectations, Business Services and Construction Sectors

On an encouraging note, the findings reflected resilience within Business Services and Construction. While SMEs in the Business Services registered declines in Turnover (down 12.12% to 4.57) and Profitability (down 11.94% to 4.50), the sector saw minimal impact to both Business Expansion (down 0.38% to 5.21) and Capital Investment (down 1.36% to 5.07). SMEs in the Business Services sector may be comparatively more optimistic than their counterparts due to the nature of their businesses, which may still allow them to capitalise on business opportunities despite a challenging near-term environment.


The Construction sector registered relatively minor declines across most indicators, suggesting that robust public sector construction demand that began last year is set to continue well into 2020. According to the BCA, public sector projects will make up about 60% of the projected construction demand for the year, spurred by major infrastructure projects such as the Tuas Mega port and Changi Airport expansion. Near term revenue and profit for Construction SMEs are likely to be affected by resource and material constraints.


Bucking the downward trend seen in other indicators, Hiring Expectations remain positive for these sectors, particularly among Transport / Storage SMEs (up 7.33% to 5.42). Despite a negative outlook, the resulting operational gaps stemming from the Chinese lockdown during the height of China’s COVID-19 outbreak may have led Transport / Storage SMEs to hire additional manpower to ensure the sustainability of daily operations. Construction also registered an increment (up 1.96% to 5.21) in Hiring Expectations, while Business Services saw a small increase in sentiments of 0.76% to 5.27.


“In view of the evolving COVID-19 situation, Singapore’s SMEs appear to be preparing to weather a sustained economic slowdown, putting expansion and investment plans on hold as downside risks materialise. Unlike the preceding quarters, domestic-facing sectors such as Retail / F&B have sustained significant impact, a development that is likely to continue into the near future as travel restrictions become increasingly commonplace. Risks to external-facing sectors remain as a consequence of considerable disruptions to global supply chains, impacting the flow of goods and people,” said James Gothard, General Manager, Credit Services & Strategy, Southeast Asia, Experian.


“As the survey was conducted during the early stages of the COVID-19 outbreak, this may just be the tip of the slide in sentiment. Experian will be monitoring the sentiment of Singapore SMEs more closely moving forward as the threat of the COVID-19 continues to escalate globally. We do expect a deeper contraction in SME sentiment in the coming days and weeks. The reality on the ground is that SMEs are focused solely on resilience and sustainability to bridge the deepening effect of the economy on their survival,” he added.


“The Singapore government has announced a slew of supporting initiatives during Budget 2020 and has introduced the Resilience Budget to help alleviate the wider economic shocks faced by the most impacted sectors. This amounts to over $55 billion in economic stimulus for the Singapore economy. With a recession on the horizon, SMEs will have to tap onto the various measures to stabilise and stay viable in these uncertain times,” concluded Mr Gothard.


Mr Ho Meng Kit, CEO of SBF, said, “These are unprecedented times for the business community. We’re facing one of the worst outbreaks in history, unprecedented border closures of entire countries and growing uncertainty in the global financial markets. While the findings of the latest Index reflect the broader sentiments, expectations and realities of our SMEs on the ground, the situation has since worsened.


The measures announced in Government’s Resilience Budget will provide some shelter and respite in the midst of this raging storm, mitigating some of the pain points of SMEs, especially those in domestic-facing sectors like retail and F&B. We urge our companies to make full use of these measures not only to ride out the crisis with confidence in the near to medium term, but also to relook their business strategy and retrain and retain their workers to prepare for the eventual recovery.


SBF, together with the other Trade Associations and Chambers (TACs), will continue to work closely together with the Government to help our companies navigate the various schemes, ensuring that the benefits flow down to them fast. SBF will also continue to support businesses through various initiatives including the SBF ManpowerConnect scheme to help with the manpower needs of our companies as well as the SBF-YBLN HOPE Fund which provides an additional source of accessible and affordable funding for our SMEs.”


Download Infographics for SBF-Experian SME Index Report 2Q20-3Q20F





DP Information Group is now Experian in Singapore. It was officially rebranded in May 2019; creating a single, unified business that offers customers increased access to a broader range of solutions across Credit Services and Decision Analytics, powered by the global scale and industry-leading capabilities of Experian.


For over 40 years, DP Info has provided industry-leading reports that give insight into the Singapore economy, its industries and principally, its SMEs. It has shared knowledge around subjects such as business sentiments and payment behaviours. These reports have been cited by government, embassies, trade organisations, banks, universities and libraries. They continue to be referenced in the media as well as in the public and private sectors. With the rebrand, all studies are now renamed and rebranded as Experian reports.


The “SBF-DP SME Index” is now the “SBF-Experian SME Index”.