Business Sentiments of Local Companies in FY22 Q3

Business sentiments of Singapore companies
(Third Quarter of FY2022: October to December 2022)

At the start of 2023, the Ministry of Trade and Industry (MTI) reported that Singapore’s economy in the fourth quarter of 2022 grew by 2.2 percent year-on-year (YoY), showing some moderation from the 4.2 percent growth in the previous quarter. Singapore’s economy grew by 3.8 percent in 2022, slower than the 7.6 percent growth in 2021.

S&P Market Intelligence reported that Singapore’s GDP (Gross Domestic Product) growth in 2022 was sustained by strong domestic consumption and a rise in international tourism expenditure, as COVID-19 restrictions were progressively eased in Singapore as well as some other Asia-Pacific economies. However, 2022 concluded after a stiff, sustained battle with the rise in inflation and global supply disruptions, and these effects are expected to be felt well into 2023. These expectations have contributed to the modest estimates of the economy’s growth in Singapore for 2023 amidst global uncertainties and weak consumer and business confidence.

Even though Singapore companies’ sentiments towards the current economy and their business situation remain largely stable, their outlook for the future reflects an anticipation of the sharp slowdowns projected. In addition, the S&P report also expects that the increase in Singapore’s Goods and Services Tax (GST) from 7 percent to 8 percent will be a slight drag on economic growth and that might in turn affect the sentiments in the subsequent quarters.

There are some silver linings. For example, China has started reopening its borders at the time of reporting and the markets are looking forward to the further surge in Chinese tourism. With domestic demand in mainland China expected to gradually improve during 2023, S&P also expects that this should help mitigate the impact of slowing export orders for Singapore’s manufacturing sector from the US and EU.

READ ALSO: BSS (Business Sentiments Survey) FY22 Q2 report

Perceptions of Singapore’s Economy and Industry

Positive sentiments towards the Singapore economy remained stable, with a difference in net balance of 1 percent compared to the previous quarter. However, companies were much more pessimistic about the future economic outlook, maintaining the sharp decline since the second half of 2022.

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. 

Sentiments about the current business situation have largely remained constant, in negative territory. Mirroring their views on the economic outlook, Singapore companies were notably less positive about their future business situation.

Revenue and Manpower Changes

YoY revenue change for firms in Jul-Sep 2022 took a dip, with a net balance of -3 percent. Despite the expected effects of recovery in economic activities, firms were generally still expecting a dip in revenue growth for Oct to Dec 2022 compared to the same period in 2021.

Overall, slightly more companies saw an increase than a decrease in manpower growth in Jul to Sep 2022, with a net balance of 1 percent. Looking at hiring expectations, companies were less optimistic about manpower growth in Oct to Dec 2022 as compared to Jul to Sep 2022. Not all sectors have been able to source for the talent needed to fill available positions, which suggests that hiring remains below expectations.

Enhancements to Work Pass Framework

When asked about current processes in place to facilitate capability transfers from their foreign to local employees, most companies with such processes pointed to training and mentoring provided by foreign talents.

Flexible Work Arrangements

A majority of the companies that offered flexible work arrangements were now either more willing to offer such arrangements or to at least keep to the same level of arrangements as during the COVID-19 pandemic. Flexible work arrangements were seen as a key factor in attracting and retaining employees, especially new generations of employees who may place greater value on such arrangements.

Flexible work arrangements have brought obvious improvements to the overall wellbeing of employees, although some employers perceive a negative impact on collaboration among teams and employee communication.

READ ALSO: Digital innovation for businesses and its impact on manpower

Sustainability

Around 2 in 5 companies agreed that increased demand for sustainability and green solutions would create new opportunities, where 40 percent of the companies already had concrete plans to adopt sustainable practices soon. Some companies may be hindered by knowledge and/or resource gaps in implementing sustainability measures, as only slightly over half were aware of how to adopt sustainable practices into their business model.

READ MORE: IndSights has thought articles on specific industry perspectives which covers sustainable industry practices:

• Sustaining the future of the security industry: Moving forward with digitalisation
• Singapore’s air transport recovery journey
• Food manufacturing in Singapore
• How will Singapore’s food services industry survive and thrive in 2021?

While IndSights found that future economic and industry sentiments continue to be pessimistic following the previous two quarters’ reports, there might be good news ahead for Singapore. The International Monetary Fund (IMF) believes that while growing trade tensions between the US and China will weigh down global growth in the coming years, that might benefit Singapore and other ASEAN countries. IMF’s chief economist, Pierre-Olivier Gourinchas opined that some businesses are rethinking where to locate their activities because of the tensions. Singapore, which is generally regarded as a safe place for investors and multinational corporations, may become a destination for these investments that would have gone elsewhere otherwise.

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About the Study

Our recent survey was conducted from October to December 2022 with 1,518 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.

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