Southeast Asia is the most business-confident region in the world, but this bullish sentiment does not extend to Singapore given its greater exposure to global trade headwinds, a global HSBC report has found. With ongoing uncertainty, Singapore business sentiment is changing towards existing trade partners and firms are beginning to look elsewhere to bridge the growth gap.
HSBC’s 2019 ‘Navigator: Now, next and how’ surveyed business leaders from over 9,100 companies across 35 markets globally to gauge business sentiment and growth prospects. The survey – which took place between August and September 2019 – also sought the views of 200 Singapore-based firms. It follows a similar report from 12 months ago.
Singapore’s exposure to global headwinds weighing on business sentiment
As one of the world’s most trade-open economies, Singapore businesses feel the effects of economic headwinds and increasing global protectionism more acutely than regional counterparts.
According to the report:
- 65 per cent of Singapore businesses expect their sales to grow in the next 12 months, considerably below the global and Asia average (79 per cent and 77 per cent respectively).
- Singapore is at odds with the rest of Southeast Asia, with 81 per cent of firms in ASEAN projecting growth in the next year - making ASEAN amongst the most bullish of trade blocs in the world.
- 40 per cent of Singapore-based respondents are pessimistic about their growth prospects, doubling global and Asia average (18 per cent and 20 per cent respectively).
- When looking at why their business growth is tapering, 51 per cent of surveyed Singaporean firms pointed to tariff shifts and 50 per cent said it was due to an unfavourable political environment.
Singapore businesses dialing down cross-border activity with traditional trade partners
China remains Singapore’s most important market for trade, however Navigator reveals a tapering. Amongst surveyed businesses in Singapore, 37 per cent identify China as one of their top three trading partners compared to 47 per cent in 2018.
Other traditional trade patterns also saw year-on-year dips in trade focus:
- Malaysia - 28 per cent saw it as a top three trade partner in 2018 compared to 21 per cent in 2019
- Europe - from 26 per cent in 2018 to 20 per cent in 2019
- North America - from 26 per cent in 2018 to 15 per cent in 2019
Stronger pivot to Asia…with Southeast Asia climbing up the ladder
According to Navigator, Taiwan is the only market where trade has increased in the past 12 months (from 5 per cent including it as a top three trade partner to 9 per cent).
Looking ahead over the next 3-5 years:
- China remains Singapore’s most important growth market, with 31 per cent of firms naming it within their top 3 future expansion markets.
- In Southeast Asia, Indonesia climbs up to become the second most important market (16 per cent), relegating Malaysia to third (15 per cent), with Japan following.
- Elsewhere, 15 per cent of businesses put United States within their top 3, and Germany becomes the lead growth market in Europe at 5 per cent.
Despite a deceleration of export growth in Southeast Asia, the region has seen 5 per cent GDP growth for several years and its economies are well positioned to weather the storm owing to their strong domestic consumption stories.1
Clearly global headwinds are prompting Singapore businesses to batten down the hatches by either dialling down activity or diversifying their trade corridors. However, Navigator tells us that Southeast Asia is the most bullish trade bloc in the world. Whilst the temptation may be to sit and wait, Singapore businesses should be turning their focus to these neighbouring countries for future growth.Alan Turner, Head of Commercial Banking, HSBC Singapore
ASEAN’s growing demographic, increasingly number of inter-regional frameworks and sprouting innovation scene make it one of the most compelling areas of the world to do business in. Climate change, Smart Cities, Belt and Road and technology are fueling the change in the region. If Singapore’s businesses do not see the potential they have to jump on these opportunities, they risk being left behind.