SINGAPORE (Dec 6): Singapore’s business optimism and profitability expectations for the year ahead have both hit two-year highs after rising 26 and 22 percentage points q-o-q, respectively, according to Grant Thornton’s annual APAC businesses report for 3Q17.

This is in line with much of the Asia Pacific region, which has seen increases in business and profitability sentiment compared to a quarter ago despite q-o-q declines globally in both components of the survey.

For the latest report by Grant Thornton, 686 businesses in Australia, Mainland China, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore and Thailand were surveyed during the months of Aug and Sept 2017.

In a Wednesday release, the professional services firm says the broader buoyant mood across much of the APAC region was driven by improvements from its two biggest economies: China and Japan.

This is particularly so for the former, given the nation’s One Belt One Road initiative as well as the movement of lower-skilled jobs to neighbouring countries, says Rodger Flynn, Grant Thornton regional head for Asia Pacific.

“As you would expect across such a large area [Asia Pacific], there are multiple contributing factors driving positive sentiment. The powerhouse that is the Chinese economy is becoming much more outward looking… Looking ahead to the future, our research unequivocally reveals a region feeling positive about its growth prospects - despite grappling with economic, cultural and political challenges,” comments Flynn.  

In Singapore, businesses have indicated that the greatest challenge they face is the lack of skilled workers, with levels at a two-year high. The biggest opportunities which local businesses see in the region are increased ASEAN cooperation (54%), the globalisation of supply chains (30%), the Trans Pacific Trade Partnership (28%), and automation (28%).

Conversely, Singapore businesses believe the biggest threats to the APAC region over the next five years are the ageing population (46%), automation (36%) and regional conflicts regarding territorial rights (32%).

Only 18% of Singapore businesses are confident that regional and geopolitical events will create a business environment that allows free trade to prosper over the next five years, while 20% are not confident and the remainder are unsure.

Meanwhile, levels of optimism across APAC hit a net 41% in 3Q with 40% of businesses expecting to hire more people over the next 12 months, a three-year high. While China appears particularly optimisic at 52%, another three-year high, Japan’s business optimism increased 9 percentage points in 3Q17, up 23 percentage points from a year ago.

On the other end of the spectrum, Australia’s business optimism has slipped from 75% a year ago to 58% in 3Q, while optimism in New Zealand is down to 68% this quarter, the lowest in two years.