Singapore Businesses Skeptical Over Economic Growth in 2017

The economic climate in Singapore has deteriorated this year, according to companies polled in a new survey, with almost half expecting the coming year to be even worse. This was one of the findings of the latest annual National Business Survey conducted by the Singapore Business Federation.

The survey polled more than 1,100 companies across all major industries about the outlook for 2017, their view on government policies, and key challenges faced, ZDNet reported.

The survey showed that operating costs and manpower remain key concerns for companies, with about two-thirds of survey respondents citing those as major challenges.

Businesses are also hoping for more government assistance to tide over this period of slowing economic growth. Only 28% of all companies polled said they are satisfied with existing government policies. Among small and medium-sized enterprises, only 27% said they were satisfied, compared with 39% of larger companies.

More than a third of SMEs and large firms polled called for more support measures to counter worsening economic conditions.

The survey also found that businesses are keen to expand abroad but might lack the necessary expertise to do so. Eight in 10 of firms polled said Asean is the preferred region for overseas expansion.

 Unwilling to Transform

Even as the Singapore economy is projected to see worsening economic climate next year, local businesses appear unwilling to transform to cope with the changing environment.

Just 15% of small and midsize businesses and 36% of large enterprises strongly agreed with the need to transform to adapt to slowing economic growth as well as technological change and disruption.

Across the board, 62% agreed with the need for businesses to transform, according to the survey.

The apparent resistance to change indicated that most businesses were still not embracing the Singapore government’s call for economic transformation, said SBF.

“More can be done to mobilize companies to be ready for further economic transformation. Only 13% of businesses described the government’s recent steps in budget 2016 to assist companies with the slowing economic growth as sufficient. Similarly, only 18% indicated that the assistance with adaptation to technological change and disruption is sufficient,” SBF noted.

 Currency to Weaken

The Singapore dollar may have recovered some lost ground after hitting multi-year lows against the greenback last week, but this momentum is unlikely to be sustainable when the new year comes around, analysts told Channel NewsAsia.

Alongside most regional currencies, the Singapore dollar has been on the back foot since Donald Trump’s surprise victory in the US presidential election shook the greenback out of a slump.

Compounded by the US Federal Reserve’s decision to raise interest rates earlier this month, the local currency fell to 1.451 versus the US dollar on Dec 22, hitting its weakest level since August 2009. The Singapore dollar has since made mild gains and was last seen fluctuating between 1.446 and 1.449 on Tuesday.

However, market analysts said the greenback’s resurgence looks set to continue in 2017 on the back of expectations for a stronger economic recovery in the US and as the Fed flagged a faster-than-expected pace of rate hikes. That could deal Asian currencies a further blow.

“With further upside for the US dollar in 2017, we expect more weakening for the Singapore dollar and in fact, weaker Asian currencies across the board with no exceptions,” Australia & New Zealand Bank’s senior FX strategist, Irene Cheung, said.

“The recent hike in US interest rates and the possibility of more aggressive rate hikes as indicated by the Fed will, for one, be underpinning the US dollar. Markets will also be looking out for the fiscal policies that Trump has been advocating,” added Cheung, referring to the president-elect’s fiscal stimulus proposals such as tax cuts that have been seen as bolstering US economic growth and inflation. “That will only be good for the US dollar.”