Businesses Stay Upbeat On S'pore Economy: Survey

Source : The Business Times, January 8, 2008

Optimism balance is still at 84% despite greater uncertainty

Despite a gloomier outlook and inflation fears, Singapore businesses remain optimistic about the local economy, a global survey of private businesses has found.















Accounting firm Grant Thornton International's latest International Business Report ranked Singapore fourth, with an optimism balance of 84 per cent, unchanged from the previous year.

The optimism balance is the proportion of upbeat respondents less those who report negative sentiments on prospects for the country's economy in the next 12 months.

The survey of 7,800 businesses in 34 economies worldwide found an average optimism score of 42 per cent, three percentage points lower than in January last year.

The most bullish responses were from the Philippines and India (95 per cent), Vietnam (87 per cent) and Hong Kong (82 per cent).

Japanese businesses were among the most pessimistic (minus 44 per cent, from minus 5 per cent last year). Thai businesses, perhaps reflecting concern over the country's unstable political climate, reported a score of minus 30 per cent.

Despite a housing downturn and a shuddering credit market, sentiment in the US improved slightly, from 14 per cent to 22 per cent.

Aw Eng Hai, a partner with Foo Kon Tan Grant Thornton, the Singapore member firm of the global group, said: 'Although we have entered a period of greater uncertainty, amid concern over fallout from the US sub-prime mortgage crisis and the increased business costs, it is encouraging to know that businesses in Singapore remain confident in the country's economy.'

In Singapore, there were mixed expectations for prospects in specific business areas. Turnover expectations were slightly down at 71 per cent from 79 per cent last year, but businesses were just as optimistic on profitability as in 2007 (64 per cent).

In the present tight labour market, businesses reported lower expectations of employment growth (31 per cent against 38 per cent last year), but also said they were more optimistic regarding investments in new buildings, plants and machinery compared to 2007.

The relatively upbeat survey findings show a markedly different picture from an earlier business confidence survey. The BT-UniSIM quarterly survey found last November that confidence had slumped amid emerging signs of a slowdown in business activity.

The prospects net balance in that survey, reflecting sentiment in the third quarter last year for the next six months, was just 39 per cent, down 17 percentage points from the previous quarter. The figures from different surveys are not comparable.

The purchasing manager's index, a leading indicator for the manufacturing industry, showed the sector expanded but at a slower pace in December. Manufacturing grew just 0.5 per cent in Q4, pulling down early estimates for the quarter's GDP growth to just 6 per cent, the slowest in three years.