Outlook for Singapore economy and industries

IMF’s World Economic Outlook report further shows that ASEAN-5’s growth outlook, of which Singapore is a part, is projected at 3.6 percent.

The Ministry of Trade and Industry of Singapore (MTI) has also forecasted that Singapore’s GDP is expected to grow 4 to 6 percent in 2021. This is line with the survey of economists by the Monetary Authority of Singapore (MAS), which expects Singapore GDP to increase to 5.8 percent in 2021.  According to the economists in MAS’ survey, the positive outlook is due to the containment of the pandemic due to quicker vaccine deployment globally, a stronger-than-expected performance from Singapore’s manufacturing sector, the possibility of borders reopening for international travel and better global growth.

From our survey, too, we found that companies’ sentiments about the current Singapore economy improved significantly compared to the last quarter. The companies’ sentiments are in line with the relatively positive reports from MTI and MAS. Companies that felt the current economy was poor dropped by 23 percentage points from Q3. About 1 in 2 companies anticipate that the economy will improve a year from now.

Similar to the outlook for Singapore’s economy, sentiment on the industry business situation seems to be stabilising. Almost 1 in 4 companies felt that the current business situation was good, an improvement from Q3. In line with the industries’ sentiments, we also saw 2 in 5 companies expecting a better business situation a year from now.

While the outlook from our survey looks positive, we would take a cautious approach on the findings. Even though MTI maintained its growth forecast at 4 to 6 percent for 2021, we should remember that it is still Singapore’s first annual contraction since 2001 and her worst recession since independence. In February, Prime Minister Lee Hsien Loong said the bulk of Singapore’s economy is expected to recover in 2021. However, some sectors, e.g., transport, tourism and aviation may take a longer time to do so.

Impact of COVID-19 on businesses

53 percent of companies reported that they were profitable in FY 2020.

In October – December 2020, more companies reported a Year-on-Year (Y-o-Y) increase in revenue compared to in July-September 2020. With the Singapore economy anticipating a gradual recovery, positive revenue trends are forecasted to continue. 25 percent of companies reported that they are expecting Y-o-Y revenue growth in January-March 2021.

Manpower changes

Almost 1 in 5 companies had increased their manpower in October – December 2020. Looking forward to January – March 2021, about 1 in 4 companies are expecting manpower growth. In addition, fewer companies expect a reduction in their manpower.

Our findings are consistent with a study by ManpowerGroup asking about companies’ hiring Plans for Q2 2021. They found that 20 percent of companies were planning to hire. According to their findings, the net employment outlook is +17 percent, improving by 2 percentage points when compared with the last quarter, and by 8 percentage points year-over-year.

The optimism in hiring is reflective of the positive sentiments towards the Singapore economy and local industry.

Business strategies for first half of 2021

For the period of January to June 2021, 1 in 3 companies are looking to increase their business expansions budgets to venture into new markets or start new product lines, while an equal number are prioritising digitalisation. It was observed that among companies that did not allocate budget for digitalisation, many experienced Y-o-Y revenue decrease and were unprofitable.

3 in 10 companies plan to scale up their spending on IT solutions to improve productivity or innovation in products and services through R&D. These may be signs of the industry stabilising as companies look to capitalise on potential growth opportunities.

In further analysis, 54 percent of companies planned to increase or maintain their training budget in the first half of 2021. Companies that allocated budget for training tended to be profitable in FY2020.

In addition, about 2 in 5 companies were considering seeking additional financing to stay afloat or cost-sharing with other businesses in the first half of 2021.  Fewer companies were looking at laying off staff or winding down their business. About 3 in 10 companies were planning to reorganise their existing workforce or to reduce staff compensation.

Building a Singaporean core

The Singapore Government has pledged to work with local companies to develop the  Singaporean core, which will help industries handle the impact of tightened foreign manpower policies. In terms of building the Singaporean Core, the provision of government support grants such as SGUnited Jobs and Skills Package and Enhanced Hiring Incentive are aimed at encouraging businesses to employ local talent and bridge possible skill gaps.

Companies cited the unattractiveness of job roles, difficulty in staff retention and manpower cost as some of their key challenges in building a Singaporean Core. Having reported that, more than 1 in 3 companies are looking towards hiring more Singaporeans to fill new roles. In addition, to fill roles currently held by foreigners, close to 1 in 5 companies considered hiring more Singaporeans to fill those roles, while 18 percent considered retraining Singaporean staff to fill those roles.

Support programmes

Jobs Growth Incentive (JGI) 

The JGI was launched to support and encourage companies to hire more Singaporeans from September 2020 to September 2021 (inclusive), to create good and long-term jobs for locals.

Employers will receive up to 50 percent of salary support when there is an increase in overall local workforce and local employees earning gross wages of at least $1,400 per month. It is applicable to the respective groups as follows:

• New non-mature local hires (aged under 40): Up to 25 percent of the first $5,000 of gross monthly salary for 12 months.
• New mature hires (aged 40 and above), persons with disabilities or ex-offenders: Up to 50 percent of first $6,000 of gross monthly salary for 18 months.

Additional Government support measures 

The Singapore Government provides various forms of support. Some of these programmes are targeted at providing capital or creating opportunities for companies by developing the workforce. Below are some noteworthy programmes. For assistance schemes grouped according to business stage/function, visit our one-stop resource page, or search for relevant schemes at GovAssist.

Jobs & Skills	Development	Capital
Productivity Solutions Grant Provides support in adoption of pre-scoped IT solutions, equipment, and consultancy services to improve productivity. 80 percent of maximum funding support from 1 Apr 2020 to 31 Mar 2022.	SME Centres Offer business diagnosis and advisory services, capability workshops and group-based upgrading projects for micro and small enterprises.	Digital Resilience Bonus Provides payouts (on top of enhanced digitalisation assistance provided under SME Go Digital programme [link] of up to $10,000 to Food Services and Retail companies adopting business process solutions, digital presence, data mining or analytics by 30 Jun 2021.
Support for Job Redesign under Productivity Solutions Grant Workforce transformation for various industries through toolkits, workshops, consultancies. Enhanced funding of up to 80 percent for consultancy services. Capped at $30,000 per enterprise, till 31 March 2022.	SkillsFuture Queen Bee Build industry-relevant skills through projects and training programmes curated by the SFQB companies. Access a skills-support ecosystem through advisory from the SFQBs to diagnose and identify skills needs.	Enterprise Financing Scheme Provides support for businesses at various stages of growth to access financing. It covers capital, fixed assets, venture debt, trade, projects, and mergers & acquisitions. Stronger support for young businesses.

 

About the study

This quarter’s survey collected views from 1,572 business leaders from various industries consisting of Environmental services, Food services, Logistics, Retail, ICT, Security, Wholesale trade, Real Estate, Air Transport, Land Transport, Sea Transport, and Hotels, in January – February 2021.

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