Singapore Economic Growth Forecast For The Next 6 Months: How Will SMEs Fare?


  • SME business sentiment in Singapore has plunged to a record low amidst the COVID-19 outbeak. The SBF-Experian SME Index for 4Q20 – 1Q21F has registered an overall reading of 46.3, the lowest reading since the inception of the SME Index in 2009.

  • The Construction / Engineering sector registered the steepest decline. Retail / F&B was the only sector that registered a marginal rise in Profitability Expectations.

  • On the bright side, the economy is expected to bounce back strongly in 2021. For now, companies should maximise the support from the Government, reinvent and restrategise, in order to position their businesses for recovery in a post-COVID-19 world.



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    Posted on 7 October 2020



    Singapore economic growth forecast


    SME business sentiment in Singapore has plunged to a record low amidst the COVID-19 outbeak. The SBF-Experian SME Index for 4Q20 – 1Q21F has registered an overall reading of 46.3, the lowest reading since the inception of the SME Index in 2009.

    The Index measures the business sentiment of SMEs in Singapore for the next six months (October 2020 to March 2021), and is based on a survey of more than 2,100 SMEs across six sectors - ‘Commerce / Trading’, ‘Construction / Engineering’, ‘Manufacturing’, ‘Retail / F&B’, ‘Business Services’, and ‘Transport / Storage’.

    The survey was conducted between 13 July to 21 August 2020.

    The Index comprises inputs from SMEs on their expectations in seven key areas – Turnover, Profitability, Business Expansion, Capital Investment, Hiring, Capacity Utilisation, and Access to Financing.

    Let’s examine what this survey has to say about Singapore's economic growth forecast for the next 6 months.



    Singapore economic growth forecast for the next 6 months



    As observed during the initial outbreak of COVID-19, SMEs across most sectors remain cautious, scaling back on growth and expansion plans.

    The Ministry of Trade and Industry (MTI) had earlier narrowed Singapore’s GDP growth forecast for 2020 to “-7.0 to -5.0 per cent”.

    Turnover Expectations registered an overall decline of 17.90% to 3.67, setting a new low for the indicator. With the exception of Retail/F&B (down 2.74% to 3.91), all other sectors saw significant double-digit percentage declines in Turnover Expectations, with the sharpest fall registered among Commerce / Trading SMEs (down 27.89% to 3.18).

    SMEs registered the lowest reading for Profitability Expectations (down 18.68% to 3.57) on record.

    The Construction / Engineering sector registered the steepest decline (down 29.57% to 3.31), while SMEs in Commerce / Trading saw the lowest reading at 3.13 (down 28.38%).

    Retail / F&B was the only sector that registered a marginal rise (up 0.76% to 3.96) in Profitability Expectations.


    Construction sector

    The Construction / Engineering sector has registered the most significant decrease in business sentiment (down 6.1%). SMEs in this sector registered significant dives in Turnover Expectations and Profitability Expectations despite some work having resumed for construction projects.

    This is understandable, considering the slowdown of work due to extended dormitory quarantines, costs incurred from prolonging project timelines, and additional costs to ensure works resume safely in compliance with COVID-Safe Worksite requirements.

    Capital Investment Expectations saw a marginal decrease while Hiring Expectations also registered a drop.


    Retail / F&B

    With business operations severely disrupted since the onset of the virus and with restrictions set to continue for the foreseeable future, SMEs in Retail / F&B were the least optimistic (44.6).

    Business Expansion Expectations for Retail / F&B though, turned positive (up 4.20% to 5.21), the highest reading among all sectors surveyed. This sector also registered a minor improvement for Capital Investment Expectations and Hiring Expectations.

    These suggest that Retail / F&B SMEs are positive that the sector will continue to improve as retail sales have recovered sharply after the circuit breaker restrictions were lifted.

    With more employees allowed to return to their workplaces, F&B outlets in the CBD area have reason to be hopeful.



    Singapore economic growth forecast: All set for a strong recovery in 2021



    According to the Monetary Authority of Singapore, the Singapore economy contracted by 13.2% in Q2 2020 compared with the same period last year. A chief factor could be the “circuit breaker” period that saw widespread business closures.

    Results of a Sept 2020 Survey of 26 economists and analysts, who closely monitor the Singapore economy, reveal that the economy is expected to contract by 7.6% year-on-year in Q3 2020.

    Overall, the survey respondents expect the GDP to decline by 6.0% in 2020.

    On the plus side, GDP growth is expected to recover to 5.5% for 2021 as a whole. This is higher than the 4.8 per cent growth for 2021 they had forecast when last surveyed in June 2020.

    The respondents estimate that the Singapore economy is most likely to grow by 4.0 to 5.9% next year.

    A report by the Asean+3 Macroeconomic Research Office (Amro) also has an optimistic outlook for Singapore’s economy, which it says, is set for a strong recovery in 2021.

    Singapore’s gross domestic product (GDP) will expand by 7 per cent in 2021 after shrinking 6 per cent in 2020, Amro said in its Asean+3 Regional Economic Outlook 2020 report released on 6 August 2020.

    "We expect Singapore to bounce back strongly in the second half and into 2021," Dr Hoe Ee Khor, Amro's chief economist, said.

    As more migrant workers are tested for Covid-19 and cleared for work, the construction sector is expected to contribute to growth later this year and further boost the recovery in 2021.

    However, services sectors such as tourism and hospitality may continue to suffer until a vaccine for COVID-19 is widely available, and curbs on international travel are not lifted.

    According to experts, a further deterioration in the COVID-19 situation, due to further waves of outbreaks or delays in vaccine development, and an escalation in US - China tensions are some key risks to economic growth.

    The Singapore government has dedicated close to S$100 billion to help tide Singapore through the COVID-19 crisis. For now, companies should maximise the support from the Government, reinvent and restrategise, in order to position their businesses for recovery in a post-COVID-19 world.




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