Business Sentiments of Local Companies in FY22 Q4

Business sentiments of Singapore companies
(Fourth Quarter of FY2022: January to March 2023)

The Ministry of Trade and Industry (MTI) has maintained a range of 0.5 percent to 2.5 percent for Singapore’s growth forecast for 2023, as data showed that the economy grew slower than expected last year. However, while MTI kept to its earlier growth forecasts, the ministry also said that Singapore’s external demand outlook “improved slightly” for 2023, since the last quarterly report in November.

For the period of January to March 2023, IndSights observed that businesses are showing a slight lift in terms of their current and future economic outlook, although inflationary pressures and geopolitical uncertainties continue to weigh on industry sentiment. While revenue expectations for the first half of 2023 turned negative, outward-oriented sectors are still bullish about manpower growth in the coming months, despite hiring challenges.

The relatively favourable outlook of outward oriented sectors is in line with MTI’s expectations, for example, growth in China is expected to pick up. “China’s faster-than-expected reopening from the COVID-19 restrictions will definitely not just help but benefit Singapore’s sectors – for example, tourism, aerospace and so on – but also uplift regional economies, which will in turn also have a positive second-order effect on Singapore,” said MTI’s permanent secretary Gabriel Lim.

READ ALSO: Report on Business Sentiment FY22 Q3 Survey

Perceptions of Singapore’s Economy and Industry

Positive sentiments towards the current economic situation remained stable, with a difference in net balance of 2% from the previous quarter. Firms were also more optimistic in their economic outlook, as compared to the previous quarter.

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. 

Singapore companies’ sentiments about both their current and future business situation have been showing a consistently negative trend for the past two quarters.

Revenue and Manpower Expectations

YoY (year on year) revenue expectations for the first half of 2023 slipped into negative territory, with a difference in net balance of -2 percent compared to the previous period.

A 17 percent net balance of firms are expecting manpower growth in the first half of 2023 where outward-oriented sectors were more likely to increase their manpower in this period.

Despite the negative expectations, Singapore businesses can expect some support from the government, as announced in Budget 2023. Some initiatives which companies can look forward to include:

• A S$4 billion top up to the National Productivity Fund and expanding the scope of the Fund to include investment promotion as a supportable activity.
• A new Enterprise Innovation Scheme to enhance the tax deductions for five key activities in the innovation value chain.
• An additional S$150 million will be set aside via the SME Co-Investment Fund to invest in promising SMEs (Small Medium Enterprises).
• A further boost of S$1 billion to the Singapore Global Enterprises initiative to provide promising companies with more dedicated and customised support.

READ ALSO: Singapore Budget 2023 infographic

Business Strategies and Challenges

From the survey, IndSights found that rising business costs, manpower issues and economic uncertainties were the top business challenges.

In addition, we found that the top business strategies favoured by companies in the next 12 months were: the streamlining of business processes, employee upskilling, and expanding their business locally.

Work Pass Framework

When asked about facilitating capability transfers between their foreign and local employees, more than a third of companies pointed to on-the-job training and mentoring by foreign talents.

IndSights found that businesses turned to the following processes to facilitate capabilities’ transfers between their foreign talent and local employees:

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

Sustainability

Singapore is known as a hub for business and innovation in Southeast Asia. As the city-state grows, there is an increasing emphasis on business sustainability. With limited natural resources and a vulnerable geographic location, Singapore has made a concerted effort to prioritise sustainability in its economic policies and practices.

IndSights found that half of the companies were aware of how they can adopt sustainable and green practices into their business model. We also found that 41 percent of the companies already had firm plans to adopt sustainable practices, or had the intention to do so in the next 12 months.

In addition, we found that 43 percent of businesses intended to train their employees for new sustainability requirements and regulations. IndSights also observed that while 14 percent of companies had no firm plans at the time of the study, they were open to adopting sustainable practices and plans.

READ MORE: IndSights has thought articles on specific industries. The following are some industry perspective articles 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?

Prospects for Singapore’s GDP (Gross Domestic Product) growth in 2023 have dimmed. According to the Monetary Authority of Singapore (MAS), Singapore’s GDP growth is projected to step down to 0.5–2.5 percent, down from 3.6 percent last year. In the meantime, the global growth outlook also remains uncertain. Tighter monetary policy in the advanced economies might be amplified by weaknesses in the financial system, further restraining credit growth and dampening confidence. MAS expects that the risks to growth in the global economy and in Singapore are inclined downwards. In anticipation of potential negative impact, Singapore businesses may want to prepare by exploring if there are the support programmes which may help them continue to grow which easing the impact of the economy.

For more information about support programmes, see: Resource Page

About the Study

Our recent survey was conducted from January to March 2023 with 1,640 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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