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SMEs in Singapore remain contractionary for fifth consecutive quarter: OCBC

Ashley Lo
Ashley Lo • 3 min read
SMEs in Singapore remain contractionary for fifth consecutive quarter: OCBC
OCBC finds SMEs remaining contractionary for another quarter. Photo: OCBC
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According to the latest small and medium-sized enterprises (SME) index by Oversea-Chinese Banking Corporation (OCBC), SMEs have remained contractionary for the fifth consecutive quarter. 

The latest quarterly index registered a reading of 49.7 in the first quarter of 2024, increasing by 0.2 from 4Q2024.

Amidst the backdrop of bumpy disinflation trends and elevated cost pressures, SME collections and payments grew by 1.4% and 1.9% y-o-y respectively. 

The OCBC SME Index measures SME business health and performance, with a reading below fifty indicating a deterioration relative to the same period a year ago. 

Outward-oriented industries such as manufacturing, transport and logistics and wholesale trade are slightly improving compared to the last quarter despite remaining contractionary. Manufacturing rose to 49.8 points, up from 49.4 from the previous quarter. 

While overall growth was hindered by weak performances in the consumer products segment, OCBC noted that SMEs can anticipate higher factory activity due to bigger manufacturing players benefitting from the upturn in the global electronics cycle and demand. 

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Additionally, domestically oriented sectors including education and food and beverage (F&B) continue to outperform. Education turned expansionary this quarter, rising to 50.5 points, increasing from 49.7 points last quarter. 

Supported by expansions in training centres and recreation classes, the education sector saw an increase in collections and payments by 8.2% and 16.0% respectively. 

The index also recorded a jump in F&B, rising to 50.2 points from 49.6 points in the previous quarter, following gains in both F&B retail and services from higher domestic consumption during Chinese New Year and tourism receipts. 

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OCBC notes that the retail sector has “shown signs of resilience and registered modest growth” over the past quarters. It has maintained a reading of 50.9 points for the last three consecutive quarters, following sustained international visitor arrivals and healthy non-discretionary spending. 

“The OCBC SME Index is likely to remain flat in the near term before a gradual upturn towards the second half of this year,” says Linus Goh, OCBC’s head of global commercial banking. 

While Singapore’s outward-oriented sectors stand to benefit from the turnaround in global electronics and a positive outlook for the ASEAN economies, “downside risks do remain with sluggish domestic consumption and export growth from the Chinese market amid lingering geopolitical tensions,” he adds.

That said, Goh notes that business sentiments have turned “slightly optimistic” in 1Q2024 compared to the 4Q2023, with 51% of the 1,200 business owners surveyed in the first quarter of 2024 expecting their businesses to perform better over the next six months. 


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