Singapore’s business optimism has crashed to an all-time low according to the recent Business Optimism Index score (BOI). This is the lowest record in 3 years; a clear reflection that indeed the country has experienced a turbulent year. The Q4 2015 has been plagued with global economic jitters with the financial uncertainties in China playing a big role.
According to the report by Singapore Commercial Credit Bureau (SCCB), the pessimism levels in the business circles have hit historical lows. The BOI has tumbled into the negative territory from 0.14% in Q4 2015 to -2.93% for Q1 2016. This is the lowest level since 2013 with the optimism level sliding on year-on-year (y-o-y) from 1.11 points for Q1 2015 to -2.93 for Q 1 2016.
Why the Pessimism?
Speaking to the press during the release of the report, Audrey Chi, the Singapore Commercial Credit Bureau Chief executive officer, said the greater pessimism levels among the country’s firms was caused by growing decrease in customer demand globally. The issue was exacerbated by flat growth experienced in most sectors including manufacturing and wholesale markets throughout the larger part of the year.
The Business Expectations Survey says 56% of businesses cite economic uncertainties as the main challenge for 2016. 21 per cent cite higher business costs while 16% say reduced sales are their greatest worry. 5% say foreign labour issues are their biggest concern while 2% cite lack of financing.
The Business Optimism Index score (BOI) is not expected to improve any time soon with Chi warning that optimism levels will remain muted over the next few months. The predictions are based on the survey where 81% of investors interviewed said they expected investments to remain unchanged.
The Q1 2016 also displays a worrying picture with only one of the six indicators remaining in the positive territory. This rates poorly compared to Q4 2015 where two indicators were in the positive figures territory, an indication that local businesses are struggling. The report shows that selling price is the only positive business indicator with volume sales, inventory levels, employment, net profits and new orders all featuring in the negative territory.
The service sector on the other hand shows great signs of recovery also emerging as the most optimistic for Q1 2016. The transport industry is second, buoyed with improving air and land transport sectors. The construction industry has fared the worst with confidence levels emerging the lowest in Q4 2015. Muted new contracts have been blamed for the poor showing and the situation is not expected to change as the Singapore Commercial Credit Bureau says new orders will still fall in the industry standing by -8.33 percentage points.
Another pessimistic sector is manufacturing with all business indicators in the contradiction region. This comes amidst a backdrop of falling output in electronics, transport engineering and precision engineering sectors.