The index is based on the transactional data of small- and medium-sized enterprises (SMEs) and is the first data-driven index that focuses on SMEs in Singapore.
The 1QFY2023 GDP nowcast is projected to be at 2%, close to the 2.1% growth recorded in 4QFY2022. The MTI advanced estimate for Singapore’s 1Q2023 GDP growth was 0.1% significantly lower than the media consensus of 1.3% from the MAS survey of professional forecasters in March. The estimate was released on April 14.
The overall SME index was weighed down by weaknesses in externally oriented industries such as transport and logistics, wholesale trade and information and communication technologies (ICT).
According to OCBC’s report, the poor performance in the logistics segment posed a drag on overall growth of the sector, with a deterioration in reading from 46.9 in 4QFY2022 to 45.4. Collections and payments of SMEs in logistics fell sharply by 43.3% and 41.4% respectively.
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This can be attributed to the industry continuing to be impacted by weaker demand amid the slowdown in global trade as well as higher energy costs.
Following the cooling of the technology industry and slump in the global chip industry, there was a weakness in data processing and software development, and ICT manufacturing and sales.
In OCBC’s SME business outlook poll conducted in March, 52% of the total 950 business owners surveyed see the slowing global economy as the key challenge for their business, up from 44% in the past quarter.
However, building and construction, food and beverage and services industries continued to register expansionary readings in 1QFY2023.
Building and construction grew at a healthy pace of 52.0 this quarter, with a 7.1% y-o-y increase in collections and 7.0% y-o-y increase in payments. Gains in the industry was mainly driven by construction, as collections and payments grew by 17.9% and 18.4% respectively on a y-o-y basis.
Outlook for the segment remains positive as demand is expected to be sustained, supported by upcoming public and private sector construction projects, however, high manpower and raw material costs remain key concerns.
In addition, business services remained expansionary at 51.5, moderating slightly from the 51.9 recorded last quarter.
Growth was primarily supported by advertising and exhibition as the segment extended another quarter of strong performance with a reading of 52.8. SMEs benefitted from the steady recovery of the MICE industry and growing demand for business events.
Meanwhile, the Business Consultancy and Accounting & Legal segments also registered slight gains this quarter, edging up to 50.2 and 51.1 respectively.
Finally, the food and beverage industry registered another quarter of solid expansion penciling in a reading of 54.0, led by a 21.4% increase in collections and 16.8% increase in payments.
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Domestic demand appears to remain robust despite the recent goods and services tax hike and high food inflation. Coupled with the return of large-scale events, corporate functions and international travel have also provided the industry with positive growth momentum.
Despite contractionary reports, 47% of over 950 business owners who participated in the OCBC SME business outlook poll expected an improvement in their business performance for the next two quarters, with 37% expect performance to remain the same and 17% expect a decline in performance - 2% more than the 15% recorded in the previous quarter.
Mr Linus Goh, Head of Global Commercial Banking, OCBC Bank, said: “Although the region’s economic outlook has improved somewhat with China's re-opening, continued weakness in global trade and manufacturing, along with persistent inflation, is likely to slow the business momentum. We expect the OCBC SME Index to ease slightly in 2QFY2023. Meanwhile, SME business owners who participated in the OCBC SME Business Outlook poll in March continue to be optimistic about business over the next two quarters, with 84% of over 950 business owners polled expecting their business performance to either improve or remain the same."
