SINGAPORE: The Singapore Business Federation’s (SBF) most recent National Business Survey 2023/2024, released on Friday (Jan 5), shows that higher costs are still the biggest hurdle businesses face. This has resulted in companies becoming more cautious in their outlook compared to one year ago.

Among businesses who say they believe the economy will worsen in 2024, almost a third (30 per cent) are small and medium-sized enterprises (SMEs). In comparison, only 22 per cent of larger companies feel this way.

While over two-fifths of firms (41 per cent) in 2023 expressed confidence that Singapore’s economy will look up this year, only a quarter (25 per cent) share this sentiment.

Moreover, while more than half of businesses (52 per cent) last year said that they were satisfied with the current climate, only 37 per cent this year said the same.

And while 46 per cent said that conditions have stayed the same over the past year, almost a third (31 per cent) of respondents indicated that conditions have worsened.

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“Looking forward, in the face of economic uncertainties, businesses are adopting a cautious outlook. Nearly half of the businesses (47 per cent) anticipate that conditions will remain the same over the next 12 months, jumping from 33 per cent in 2022 who held this view.

Twenty-five per cent think the economy will improve in the next 12 months, down from 41 per cent,” the survey said.

Interestingly, firms in the construction and civil engineering, logistics and transportation, banking, and insurance sectors are more optimistic about this year, while the IT and professional services and manufacturing sectors have a more negative outlook.

While 58 per cent cited increased business costs as their number one challenge in the coming year, this percentage is down from 66 per cent from the previous year, with construction and civil engineering (69 per cent) and manufacturing (65 per cent) being the most affected sectors.

The top three business cost increases are as follows: wages (75 per cent), pass-through from suppliers (58 per cent) and electricity costs (56 per cent), showing the same results from 2023.

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Additionally, more than eight in 10 firms say they were affected by interest rate hikes and an increase in the cost of funding in 2023.

Almost half of the firms surveyed, or 46 per cent, said they faced a slight to severe credit crunch. In 2023, six per cent said they do not have sufficient cash to operate, but 11 per cent had the same response for this year.

The sectors most affected by the credit crunch are construction and civil engineering (63 per cent), wholesale trade (49 per cent) and retail, real estate, hotels, restaurants, and accommodations (47 per cent).

After higher business costs, manpower-related problems are the next biggest challenge for businesses, including availability (53 per cent), retention (42 per cent) and foreign worker policies (39 per cent).

These sectors that have been most affected by manpower issues are construction and civil engineering (68 per cent), logistics and transport (68 per cent), manufacturing (58 per cent) and IT and professional services (58 per cent).

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Read the survey in full here. /TISG

Read also: Singapore’s Economic Outlook for 2024