SINGAPORE businesses are more positive on the economic outlook for this year, even as rising manpower costs and demand uncertainty remain as key concerns, based on the annual national business survey by the Singapore Business Federation (SBF).
At 51 per cent, up slightly from 47 per cent in the year-ago period, the majority of businesses expect the economy to remain the same in the next 12 months, according to the findings of the survey released on Thursday (Jan 2).
The majority of both small and medium-sized enterprises (SMEs) and large companies maintained a neutral outlook.
Overall, more businesses now expect the economy to improve in this period at 26 per cent, up marginally from 25 per cent in Q4 2023’s survey. This is even as it dipped from the 27 per cent that expected the economy to improve in the 12-month period in Q2 2024’s survey.
In contrast, the proportion of companies surveyed in the final quarter of 2024 that expect the economy to worsen fell to 22 per cent, compared with 28 per cent of respondents in the corresponding 2023 period.
Within the fourth quarter, business sentiment also became more positive, with 40 per cent of companies satisfied with the current business climate, up from 37 per cent in the year-ago period, and 30 per cent in Q2. Fewer companies reported that they were dissatisfied (18 per cent) or neutral (41 per cent), compared to the two earlier periods.
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Satisfaction with Asean’s business climate improved since end-2023 and mid-2024, with close to a third of businesses reporting improvements in regional business conditions.
The latest survey was conducted from Oct 11 to Nov 11, 2024, gathering responses from 519 businesses across all key industries. These comprised 83 per cent SMEs and 17 per cent large companies.
The more optimistic outlook moving into 2025 – reflecting businesses’ “resilience, adaptability and preparedness for the future by investing in capability building” – is encouraging to see, said SBF chief executive Kok Ping Soon.
He added: “This survey, conducted before the US presidential election results, shows that many companies are already concerned with the uncertainty in demand arising from geopolitical forces. External factors such as increased trade tensions, potential tariff wars and spillovers from regional conflicts are likely to dominate business concerns in the coming year.”
Persistent challenges
Indeed, challenges remain, with manpower costs again recorded as the top concern, noted by 66 per cent of respondents. Still, this was down from 72 per cent in 2023.
The second-largest concern highlighted by businesses in the 2024 survey was customer demand uncertainty (45 per cent), followed by rental cost (43 per cent), foreign workforce policies (40 per cent) and availability of manpower (37 per cent).
“While manpower cost is the top challenge for both SMEs and large companies, SMEs are more challenged in customer demand uncertainty and rental cost, and large companies are more concerned with foreign workforce policies and changing regulations in Singapore,” the report stated.
Despite rising business costs, more than half of businesses were able to maintain or increase profitability over the past year.
To offset cost pressures, businesses have mainly turned to cost-saving initiatives (51 per cent) and price hikes (41 per cent).
The survey also found that businesses are recalibrating priorities by emphasising revenue growth, positive cash flow, and talent attraction and retention, marking a shift away from growth-driven strategies – such as expanding market share – to strengthening internal capabilities and ensuring operational sustainability.
Financial resilience
More than half (54 per cent) of businesses do not face liquidity issues, the survey found. But of the 25 per cent of businesses that face severe to moderate credit crunch, 40 per cent lack funds to sustain operations for the next three to six months.
Businesses are therefore prioritising the reduction of non-essential outflows (46 per cent), assessing customers’ credit risks to enhance collection capability (27 per cent), delaying outflows (25 per cent) and considering credit facilities (24 per cent).
Businesses are also seeking assistance from government support programmes (70 per cent) to help manage their financing needs. Other measures required include industry-specific support and guidance from trade associations and industry networks (24 per cent) and flexible repayment terms for loans (21 per cent).
Less attractive globally
A smaller proportion of businesses view Singapore as a highly attractive global talent hub, falling to 41 per cent in the next 12 months, compared with 43 per cent in the past 12 months.
The decrease is most significant for large companies – to 47 per cent for the upcoming 12 months, from 55 per cent in the previous 12 months.
On foreigners, the majority (59 per cent) of local employees expressed a generally positive attitude. Only 7 per cent feel that foreigners view them as competition.
“Given our manpower constraints, we need to increase Singapore’s absorptive capacity of a complementary foreign workforce to maintain our attractiveness as a global talent hub,” said Kok.
Seeking more support
For 2025’s Budget, companies are most looking for government support to manage their financing needs (35 per cent), for human capital development (34 per cent) and digitalisation for business transformation (33 per cent).
Schemes for cost management (64 per cent), attracting and retaining the local workforce (43 per cent) and addressing foreign manpower issues (41 per cent) top their Budget 2025 wishlist.
Prime Minister and Finance Minister Lawrence Wong will deliver this year’s Budget statement in Parliament on Feb 18.
