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Singapore businesses are becoming less confident about their prospects, two government surveys showed, a further sign that Southeast Asia’s most advanced economy is slowing as external risks continue to build.
according to the Singapore Economic Development Board’s latest quarterly survey of expectations in the sector released Wednesday. That’s a sharp swing from the findings of the previous survey wherein more firms were bullish.
The drop in Singapore business confidence comes just days after the city-state reported an unexpected fall in factory output for September, prompting several economists to cut their growth forecasts for this year.
Recent economic data from elsewhere in Asia have also disappointed, strengthening the view that Singapore’s economy would suffer collateral damage. Earlier Wednesday, China’s official purchasing managers’ index for October showed manufacturing activity at its weakest since July 2016. In South Korea, industrial production contracted sharply last month as auto production fell.
However, the Monetary Authority of Singapore remains sanguine about the domestic economy. In a report last week, the central bank reiterated that growth this year would fall in the upper half of the 2.5%-3.5% forecast range before moderating slightly in 2019.
The MAS pointed to strength in services clusters such as finance and technology as a reason for its optimism.
Manufacturing accounts for about a fifth of Singapore’s gross domestic product, while services make up about 75%.
Song Seng Wun, an economist at CIMB Private Banking, said that Singapore’s economy remained relatively healthy as seen from the employment growth in the third quarter, with headcount rising even in the manufacturing sector.
Song said the decision by British company Dyson to build and assemble electric cars in the city-state, the world’s most expensive place to own a car, “shows that Singapore’s economy is still OK.”
According to EDB, manufacturing sentiment was strongest in the transport engineering cluster where a net 21% of companies expect conditions to improve in the next six months.
Confidence was lowest in the info-communications and consumer electronics segment, given growing concerns over trade tensions between the U.S. and China, Singapore’s largest export market. Sentiment was also bleak within the precision engineering cluster due to the expected weakness in orders for machinery and systems.
Thanks to higher crude prices, oil and gas-field equipment manufacturers anticipate more orders while shipyards foresee more ship repairing work, EDB said. In the aerospace segment, firms continue to expect strong demand for aircraft engine repair in the next six months, the agency added.
However, orders for offshore rigs remain subdued, EDB said.
Singapore is home to Keppel Corp. and Sembcorp Marine, the world’s two largest builders of offshore rigs.
Overall, a weighted 9% of manufacturers have a positive outlook about the next six months while 10% predict worsening conditions.
The net 1% of companies forecasting less favorable conditions marked a turnaround from the previous quarter when 7% of firms were bullish about the future.
Separately, the statistics department said a net 3% of firms in the services sector were now optimistic about prospects, down from 9% in the previous survey carried out three months ago.
Both surveys were carried out in September and October with the responses weighted to reflect the size of the respective firms.
In services, the statistics department said all industries expect business conditions to improve or remain the same with the exception of real estate, which has been hit by the government measures to cool prices.
The most optimistic industry was food and beverage, followed by retail and accommodation.
By contrast, there was a sharp drop in business confidence in the financial and insurance industry, where a net 1% of firms were bullish about prospects, down from 14% in the previous survey.
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