Local SMEs cautiously positive about economic outlook

Small and medium enterprises (SMEs) remain positive about Singapore’s economic outlook this year.

But sentiment has turned somewhat cautious, according to the latest survey by banking giant HSBC on Small Business Confidence in Asia Pacific.

Compared to 2007, SMEs will be taking on a more conservative approach this year as the economy is expected to moderate amid a likely slowdown in the US.

HSBC is forecasting a 6 percent GDP growth for Singapore’s economy in 2008, down from 7.5 percent last year.

Robert Prior-Wandesforde, Senior Asian Economist, HSBC, said: “Inflation in Singapore is probably the main domestic risk and we’re going to see it rise further before it starts to fall in the second half of this year. I think it may well go up to 6 percent or in fact just above 6 percent. That will provide some constraints on real income, but inflation is not running as quickly as overall wage growth. There are real wage gains happening in the economy at the moment.”

Wage growth in Singapore at the moment is running at 7 percent or so, while inflation is around 4 percent.

According to the survey, 52 percent of the respondents from Singapore expected economic growth to remain the same as 2007, while 55 percent said their capital expenditure would remain the same.

But those who plan to raise their capital expenditure fell to 35 percent from 44 percent in the previous survey.

More than seven in ten Singapore companies said they would keep their current headcounts, and a quarter – down from 36 percent – said they were looking at increasing staff strength.

Those who are looking to reduce headcount also went down, from 6 percent in the last survey to 2 percent.

SMEs are generally positive about the trade outlook with the international community, especially with China and the Asia Pacific economies.

A total of 46 percent of respondents from Singapore expected trade volumes within the rest of Asia to increase over the next six months.

HSBC said Singapore SMEs have much to gain from venturing overseas.

Tan Siew Meng, Head of Commercial Banking, HSBC, said: “From HSBC’s perspective, we continue to support the SMEs in terms of their regionalisation and internationalisation objectives. You can see from the survey results that Vietnam and India, for example, are markets that are still very high in terms of confidence level and you know our SMEs in Singapore can take advantage of the growth expectations in those countries to expand their scope.”

From the survey, expansion seems to be on the cards for many SMEs. 45 percent of the respondents with cross-border activities planned to increase their investments.

The HSBC survey was conducted in the fourth quarter of last year and it covered 2,700 SMEs in Singapore, Malaysia, Hong Kong, China, Taiwan, India, Vietnam, South Korea and Indonesia. – CNA/so

Source : Channel NewsAsia – 4 Feb 2008

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