Singapore Gov slash GDP forecast to 1.5%, Business Outlook Gloomier

Business pessimism continues to spread among companies in Singapore although the contagion has slowed. Sentiment worsened even as business activity weakened further in the third quarter, says the latest Business Times-UniSIM Business Climate Survey.

More firms experienced a contraction in sales and new orders last quarter. And though fewer firms’ profits fell in Q3, more suffered larger profit declines, the quarterly survey shows ahead of final GDP figures for Q3 due for release this Friday.

Business conditions reported by the 165 firms polled in October deteriorated from Q2, as the economy shrank 1.5 per cent in Q3 on a quarter-on-quarter annualised basis, according to the official advance estimate. This meant that GDP grew 1.3 per cent year-on-year last quarter.

But economists think that the advance estimate may be revised downwards this Friday, given poorer than expected trade and industrial production data for September.

With that backdrop, 59 per cent of the firms polled are expecting gloomier business prospects in the six months till March 2013 – with 10 per cent saying things could get “much worse”.

The pessimists thus outnumber the 28 per cent who expect things to remain “unchanged” as well as the 14 per cent who think business prospects will get “better”. In Q2, 2 per cent of respondents said business prospects could get “much better”- none did in the latest survey.

This resulted in an overall business prospects net balance – the difference between the proportion of positive and negative responses – of minus 46 per cent for Q3. But the 13 percentage point drop from Q2 was milder than the 55-point plunge in Q2 from Q1.

Still, “pessimism rose irrespective of firm size and ownership”, noted survey director Chow Kit Boey.

With more than half the respondents engaged in business abroad, the survey also surfaced more pessimism over business prospects overseas than in Singapore, “probably as a result of the euro crisis and weaker business conditions in the US and China”, Ms Chow added.

Small firms, defined in this survey as manufacturers with annual sales of up to $10 million or non-manufacturers with annual sales of up to $5 million, were the most pessimistic group. They had a business prospects net balance of minus 65 per cent.

These findings trend in the same direction as those of other recent business sentiment polls.

For instance, though the Singapore Business Federation and DP Information Group’s latest SBF-DP SME Index stayed in positive territory, its survey found declines for both revenue and profit expectations of SMEs for the six months till March.

Official business expectations surveys, which polled firms of all sizes in September and October, also showed sentiment of both manufacturing and services sectors softening for the six months to March.

Via – AsiaOne

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