World Economy

Singapore Contractors’ Cash Flows Worsen

For the whole of 2016, the construction sector expanded marginally by 0.2%.
For the whole of 2016, the construction sector expanded marginally by 0.2%.

Singapore contractors’ cash flows continued to deteriorate in the first quarter, with the small guys hurting the most in the economy’s worst-performing sector.

Slow payments by the construction sector in Q1 2017 jumped to 55.22%, up from 47.97% in Q4 2016, said the Singapore Commercial Credit Bureau on Tuesday, Yahoo quoted Singapore’s Commercial Credit Bureau as reporting.

In the economy at large, there was little change by Singapore firms in their payment performance, reflecting the weak economy. Quarter-on-quarter, slow payments slid slightly by 0.47 percentage points—from 43.28% in Q4 2016 to 42.81% in Q1 2017, the bureau said.

Payments are considered prompt when at least 90% of total bills are paid within the agreed payment terms; payments are classified as slow when more than half the total bills are paid after the period under the agreed credit terms.

As with Q4 2016, the construction sector registered the highest proportion of slow payments since Q4 2011, when such payments accounted for nearly three-fifths of payment delays, at 58.30%.

The sector registered the highest quarter-on-quarter rise in payment delays as a result of a visible deterioration in payment performance by the building construction sub-sector and special-trade contractors.

Main contractors typically outsource work in plumbing, painting, plastering, carpentry, roofing, structural steel erection, glass and glazing to special-trade contractors.

Last month, economists said construction will remain the worst-performing sector in Singapore this year.

The median forecast among economists in the latest quarterly survey by the Monetary Authority of Singapore put the sector’s growth at just 0.3% this year—a major downgrade from last December’s forecast of 2.4%.

The government has said it will bring forward S$700 million ($499.3 million) in infrastructure projects to support the construction sector.

The sector shrank by 2.8% in the fourth quarter of 2016, extending the 2.2% contraction recorded in the quarter before. For the whole of 2016, the sector expanded marginally by 0.2%, moderating from the 3.9% growth in the previous year.

Contracts awarded fell by 29% to S$4.6 billion in Q4 2016, on the back of a fall in both public- and private-sector construction demand.

For the full year, total contracts awarded fell by 3.6% to S$26 billion, as a result of weakness in private-sector construction demand; public-sector construction demand, on the other hand, provided some support.

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