Singapore firms see silver lining as Q4 performance downturn eases: BT-SUSS
Singapore firms' performance and prospects net balances
Q3 2023
Q4 2023
Sales
Profits
Orders/New business
Business prospects
-50
-40
-30
-20
-10
0
Sales net balance
The net balance for sales stayed in contraction for the fifth straight quarter, but improved by 19 points to minus 16 per cent.
Profits net balance
The profits net balance improved by 14 points to minus 36 per cent.
Sales Net Balance
The net balance for sales stayed in contraction for the fifth straight quarter, but improved by 19 points to minus 16 per cent
Profit Net Balance
The profits net balance improved by 14 points to minus 36 per cent.
Orders/New business net balance
The net balance for orders or new business rose 11 points to minus 33 per cent.
Business prospects net balance
Overall, firms were less pessimistic about business prospects for the next six months, compared to a quarter earlier. The net balance for business prospects gained 25 points to minus 10 per cent, with pessimism waning for all groups of firms.
Singapore firms are feeling less pessimistic as declines in performance grow less dire, the latest Business Times-Singapore University of Social Sciences (BT-SUSS) Business Climate Survey has found.
Business performance continued to decline, with net balances of all three of the survey's indicators – sales, profits, and orders or new business – staying in negative territory in the fourth quarter of 2023. But these were far milder than in the previous quarter, with double-digit improvements.
For each indicator, the survey derives a net balance which is the difference between the share of firms with an increase and those with a decrease in an indicator compared to the year-ago period. A positive net balance suggests expansion, and a negative one, contraction.For all three performance indicators, small firms were the only group where net balances worsened from the previous quarter.
“Improving business indicators in the survey suggest that the Singapore economy is on the mend and recovering from the weak patch seen in the first three quarters of last year,” said Maybank regional co-head of macro research Chua Hak Bin.
OCBC chief economist Selena Ling said the improved business performance is consistent with the better headline gross domestic product growth in Q4.
Singapore’s Q4 GDP growth came in at 2.8 per cent, up from 1 per cent in Q3, according to advance estimates from the Ministry of Trade and Industry. This lifted Singapore’s full-year growth in 2023 to 1.2 per cent.
The BT-SUSS findings of improved sentiments for the first half of 2024 were generally aligned with recent business expectations surveys by the government.
A net weighted balance of 10 per cent of manufacturing firms anticipate an improved business situation for January to June, compared to Q4 2023, according to Economic Development Board data.
Meanwhile, a net weighted balance of 5 per cent of services firms have a more favourable business outlook for the current half-year, according to the Singapore Department of Statistics.
Ling noted that the BT-SUSS data also corroborates the latest purchasing managers’ index data for January, which pointed to improved new business and output.
But the continued negative net balance for business prospects suggests that firms are still cautious, said DBS economist Chua Han Teng.
“This is likely due to global economic uncertainties, such as high interest rates in advanced economies, bumpy conditions in China, and lingering geopolitical tensions that could still disrupt supply chains,” he added.
What stood out in the report, said Ling, was that small firms faced worse sales and profit contraction compared to in Q3, and there is a persistent divergence between small and large firms.
“This may be a cause for a more responsive Budget 2024 to the challenges facing small and medium-sized enterprises even though the pandemic is over,” she added.
Waning pessimism
Sales
Profits
Orders/New business
Business prospects
The survey consultants project that first-quarter growth could be between 3.7 and 4.3 per cent.
This was more bullish than both Maybank and OCBC’s estimates. Maybank's Dr Chua forecasts first-quarter growth of between 2.5 and 3.1 per cent, while Ling expects growth of 1.7 per cent.
“The manufacturing recovery is materialising, but is not broad-based, driven largely by electronics, and in particular, semiconductors,” said Dr Chua.
Tailwinds from the services sector – which saw a surge in early 2023 due to revenge spending – are also starting to fade, he added.
He noted that retail sales contracted 0.4 per cent year on year in December, while retail sales excluding motor vehicles fell 3 per cent on the year.
GDP growth projections
Survey consultants' Q1 forecast
3.7% - 4.3%
0.9% - 1%
Government's full-year forecast
Asean remains an attractive investment destination, said Ling, given ongoing geopolitical tensions such as Russia’s war in Ukraine, tensions in the Middle East, and the rivalry between the United States and China.
Singapore firms affected by the US-China rivalry may be looking to diversify their manufacturing supply chains from China, and countries in Asean may benefit from this shift, said Dr Chua.
The potential Special Economic Zone between Singapore and Johor in Malaysia may also be drawing investment interest, he added.
29.0%
Improved sentiments
Opportunities abroad
The construction sector remained the “star performer” in Q4, taking 16 out of 20 top positions. Overall, construction firms had the best performance across all four indicators.
Construction remained the “star performer” sector in Q4.
SaleS
Profits
Orders/New business
Business prospects
Construction
Construction
Construction
Construction
Top performers among large firms
Financial and business services
Financial and business services
Construction
Construction
Large finance and business services sector firms reported the best results in sales and profits.
Overall top performers in Q4
Separately, businesses were asked where they plan to expand in the next six months.
Two-fifths of firms had no overseas expansion plans – lower than a year ago, though higher than in the pre-pandemic Q1 2020 survey. This implies that internationalisation activities have not yet recovered to pre-pandemic levels, said the survey consultants.
Expanding abroad
More companies plan to expand overseas compared to a year ago.
Single
destination
24.4%
No
expansion
42.0%
Multi-
destination
33.6%
Among those with plans to expand, 42 per cent said they planned to expand to just one destination. For these, the most-cited countries were Malaysia, followed by Indonesia, then Vietnam and China, which tied for third place. The consultants noted that China has become more popular for single-destination expansions.
Where businesses are going
Malaysia was the most-cited country for companies planning to expand to one destination.
Malaysia
Indonesia
Vietnam
Others
China
Thailand
United States
0
2
4
6
8
10
12
26.1%
23.2%
Indonesia
Vietnam
Malaysia
Share of votes (%)
Where businesses are going
The top three destinations for firms planning to expand to multiple destinations were Vietnam, Indonesia and Malaysia.
For businesses intending to expand to multiple destinations, the most-cited countries were also Malaysia, Indonesia and Vietnam.
But the combined share of this top three, at 47.8 per cent, was lower than the 51 per cent recorded a year earlier.
This was partly due to increased mentions of China and Thailand, said the consultants.
Source: BT-SUSS Business Climate Survey
BTVisual: Chaytanya Bandishte, Gareth Chung
−10%
−16%
−33%
−36%
SaleS
Profits
Orders/New business
Business prospects
Q4 2023
Q4 2022
No
expansion
47.1%
Single
destination
22.5%
Multi-
destination
30.4%
Single
destination
22.5%
No
expansion
47.1%
Multi-
destination
30.4%
Q4 2023
Q4 2022