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Singaporean SMEs can expect the second quarter of 2022 to remain largely positive, with the further easing of Covid-19 measures and border controls at home and internationally.

According to the OCBC SME Index, the 1Q22 Index came in at 50.5, marking 5 consecutive quarters of expansion. A reading above 50 indicates improved activity, while below 50 indicates a deterioration relative to the same period a year ago.

While the index is expected to remain slightly expansionary in the second quarter, it is subject to downside risks that could derail the recovery of SMEs, the bank said.

These include a faster pace of monetary policy tightening which could affect financing costs and cash flow of SMEs, further escalation of geopolitical conflicts, and the emergence of any new Covid-19 variants.

1Q22 collections declined slightly by 2 percent, compared to a seasonally stronger 4Q21. The 1Q22 Gross Domestic Product (GDP) Nowcast came in at 3.3 percent, a “slowdown” from the 6.1 percent GDP growth in 4Q21.

The GDP Nowcast estimates GDP using the latest OCBC SME Index, and the reading is aligned with the consensus of 3.7 percent in the Monetary Authority of Singapore’s Survey of Professional Forecasters in March.

“The expansionary reading in the 1Q22 OCBC SME Index signals an encouraging start to the year for SMEs on the back of a broad-based recovery in 2021,” said Linus Goh, head of global commercial banking at OCBC Bank.

The OCBC SME Index is derived using the bank’s transaction data of over 100,000 SME customers in Singapore with an annual sales turnover of up to S$30 million.

The index also uses indicators such as collections, payments, cash flow and operating transactions of the SMEs.

The positive reading in 1Q22 was mixed across industries. The food and beverage (F&B) industry contracted for the third consecutive quarter to 47.7, as Covid-19 restrictions persisted, and firms faced higher costs.

F&B services saw collections drop year on year due to the lower 5-pax dining-out restrictions, while F&B retail and wholesale trade saw contractions at 48.0 and 48.7 respectively.

The F&B industry, however, is expected to see a boost in activity from both locals and tourists, as domestic and border restrictions eased significantly in end-March, the bank noted.

Separately, building and construction slowed to 49.9 from 51.7 last quarter, as the industry remains bogged down by manpower shortages, higher commodity and energy prices as well as supply chain disruptions. Property cooling measures announced last quarter also weigh on the industry.

The construction segment saw its third consecutive quarter of slowdown and dipped below 50 for the first time since 4Q20. Building materials saw a gentler decline to 50.9, supported by rising material prices. Other segments such as investment companies and operators also fell into the contractionary territory at 49.0.

Healthcare remained flat compared with the previous quarter, with a reading of 50.1, as demand for healthcare supplies continues to drop. On the other hand, education fell into contractionary territory with a reading of 49.0, as demand for training centers continued to see a slowdown in growth since 3Q21.

Meanwhile, the wholesale trade, transport & logistics and manufacturing sectors continued to see growth on the back of strong cross-border trade. Growth in information, communications and technology also remained healthy, with the continued momentum in digitalisation, while business services benefited from the strong pickup in demand with the recovery of the economy.


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