Business Sentiments of Local Companies in FY22 Q1

Business sentiments of local companies on the Singapore economy and industries
(First Quarter FY2022: April to June 2022)

Even as the Singapore economy continues on the path to post-pandemic recovery, the Ministry of Trade and Industry (MTI) announced in May that the 2022 Gross Domestic Product (GDP) growth forecast for Singapore will be maintained at 3 percent to 5 percent.  

In addition, Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS) said that Singapore’s economic growth is expected to moderate further, following a downturn in its major trading partners, while global inflation is expected to ease in 2023. Mr Menon also remarked that, “We are seeing a surge in inflation globally because a robust demand recovery post-COVID has run into supply-side frictions and, more recently, war-related disruptions.” 

With the resumption of socioeconomic activities, led by the easing of community measures and reopening of borders, IndSights’ Business Sentiment Survey (BSS) in the first quarter of the financial year 2022, saw more favorable revenue figures across most industries. However, macroeconomic factors such as inflation and rising business costs seemed to weigh on companies’ sentiments about the future, although revenue and manpower outlook remain stable. Read on for more details. 

READ ALSO: Business Sentiments Survey FY21 Q4 report

Perceptions of Singapore’s Economy and Industry

From the BSS findings, we found that positive sentiments on the Singapore economy increased, with a net balance of 16 percent compared to 11 percent in the previous quarter. In addition, companies were less optimistic about the economic outlook in a year’s time.

Singapore companies’ sentiments about their current industry situation remained largely stable from the previous quarter at a net balance of -10 percent. Similar to sentiments on the future economic outlook, companies were less positive about their future business/industry situation.

Note: A net balance score is calculated by taking the difference between the percentages of respondents with positive responses against the percentages of respondents with negative responses. A plus sign in the net balance indicates a net upward trend (i.e., a higher proportion of companies were optimistic) and a minus sign denotes a net downward trend (i.e., a higher proportion of companies were pessimistic) of the economic/industry situation. 

Reports share that private-sector analysts shaved their growth forecast, in line with MTI’s forecast, due to the sharper-than-expected rise in inflation, slower economic activity in China, and weaker global growth driven partly by economies such as the United States and the euro zone. The analysts also raised their inflation forecasts for 2022, where overall inflation is expected to hit 5 percent, up from 3.6 percent in the previous MAS survey. The rise in inflation is driven mainly by higher energy and food prices.

It would be interesting to view the impact of these economic forces on business sentiments in the following quarter(s). 

READ ALSO: If you would like to contribute your feedback in future studies, register here

Revenue and Manpower Changes

A net balance of -2 percent of companies reported having experienced a decrease in revenue in the period of January to March 2022. The sea transport and financial services sectors saw a higher proportion of companies with revenue increases, while the education, retail, and logistics industries topped the sectors which experienced Year-on-Year (Y-o-Y) revenue decreases in January to March 2022.  

Regarding the expected recovery in economic activities, a net balance of 11 percent of firms foresee positive revenue change for the period of April to June 2022, compared with January to March 2022. 

In addition to the Y-o-Y revenue changes, IndSights Research found that most Singapore companies maintained their headcount in January to March 2022, with manpower changes remaining largely stable from the previous quarter. Companies in food manufacturing, food services, and logistics were among those that reported more manpower reductions in January to March 2022, likely due to the opening of borders and many workers returning to their hometowns in neighbouring countries. 

However, the expected manpower outlook remains positive at 22 percent where almost all industries expected an increase in hiring activity in April to June 2022.

Importance of Transformation

One in two companies thought that transformation (e.g., through innovation and digital solutions) would be moderately to extremely important for their company’s growth in the next five years.

Digital Platforms

Digital platforms are systems and interfaces that create value by facilitating exchanges between two or more interdependent groups, for example business-to-customer (B2B), business-to-customer (B2C) or even customer-to-customer (C2C) exchanges. Launched in October 2019, the Digital Platforms in a Digital Economy white paper aimed to generate awareness among businesses on digital platforms.

Regarding the usage of digital platforms, IndSights Research found that 34 percent of companies use at least one form of digital platform service for their business.

When asked about who should bear the cost increase to protect digital platform workers, respondents thought that the top three stakeholders should be: the digital platform companies, the businesses that sell on the digital platforms, and consumers. 

For more information on Digital Platforms Programme, see:

• Digital Platforms for construction
• Digital Platforms to enable Artificial Intelligence and Data Services

Impact of Rising Business Costs

Two in three companies reported being at least moderately impacted by rising business costs, with manpower costs topping the list at 51 percent. The other areas of impact on rising business costs include raw material costs at 18 percent and logistics costs at 14 percent.

Additionally, at least 65 percent of Singapore companies responded that they were moderately to extremely impacted by the rising costs on businesses. The findings on rising business costs corresponds to the feedback IndSights gets from business leaders during our industry chats. One of the most common responses mentioned when asked about business challenges tended to be about manpower costs, the higher cost of hiring locals, and the challenges brought about by the restrictions in employment and work pass quotas.

INDUSTRY CHAT: If you are interested to share your business experiences, let us know HERE

While the economic outlook seems muted, we note that not all industries are equally impacted. According to Channel News Asia, the electronics industry is supported by a strong global demand for semiconductors from the 5G and automotive markets, as well as cloud services and data centers. Singapore reopening its borders to vaccinated travelers and the easing of travel restrictions will boost the professional services sector, such as consultancy and legal, and help consumer-facing sectors, such as the retail and food services industries. 

 Correspondingly, the easing of border restrictions has benefitted air travel, and visitor arrivals numbers are expected to pick up faster than projected. The recovery of aviation is expected to have knock-off effects on tourism-related, entertainment, and recreation sectors.  

READ MORE: Singapore’s air transport recovery journey

About the Study

Our recent survey was conducted in April to June 2022 with 1,473 business leaders from: Environmental Services, Food Services, Logistics, Retail, Information & Communications, Security, Wholesale Trade, Real Estate, Air Transport, Land Transport, Sea Transport, Hotels, Construction, Financial Services, Professional Services, Food Manufacturing, Healthcare, Education, Electronics, Energy & Chemicals, Marine & Offshore, Precision Engineering, and Aerospace. 

Register HERE to participate in our other upcoming surveys relevant to your industry. 

FOLLOW us on LinkedIn to stay updated with our research reports, articles, and polls. 

Click here for full abridged version of the findings. Participate in our future surveys to receive full reports.