5 November 2019

SG businesses turn to SEA as hedge to global growth headwinds

** 65% of Singapore businesses expect to grow vs 79% globally
** Singapore businesses seeking new growth markets as a hedge to trade slow-down
** Southeast Asia the most bullish trade bloc globally

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% of Singapore businesses expect their sales to grow in the next 12 months, considerably below the global and Asia average (79% and 77% respectively).
  • Singapore is at odds with the rest of Southeast Asia, with 81% of firms in ASEAN projecting growth in the next year - making ASEAN amongst the most bullish of trade blocs in the world.
  • 40% of Singapore-based respondents are pessimistic about their growth prospects, doubling global and Asia average (18% and 20% respectively).
  • When looking at why their business growth is tapering, 51% of surveyed Singaporean firms pointed to tariff shifts and 50% 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% identify China as one of their top three trading partners compared to 47% in 2018.

Other traditional trade patterns also saw year-on-year dips in trade focus:

  • Malaysia - 29% saw it as a top three trade partner in 2018 compared to 21% in 2019
  • Europe - from 26% in 2018 to 20% in 2019
  • North America - from 26% in 2018 to 15% 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% including it as a top three trade partner to 9%).

Looking ahead over the next 3-5 years:

  • China remains Singapore’s most important growth market, with 31% 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%), relegating Malaysia to third (15%), with Japan following. 
  • Elsewhere, 15% of businesses put United States within their top 3, and Germany becomes the lead growth market in Europe at 5%. 

Despite a deceleration of export growth in Southeast Asia, the region has seen 5% GDP growth for several years and its economies are well positioned to weather the storm owing to their strong domestic consumption stories.1

Commenting on the report, Alan Turner, Head of Commercial Banking, HSBC Singapore: “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.”

“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.”

Notes to Editors
HSBC Navigator: Now, next and how for business
HSBC’s Navigator report comprises a global survey gauging business sentiment and expectations on trade activity and business growth from 9,131 decision-makers in 35 markets. Research was conducted by Kantar for HSBC between August and September 2019. HSBC’s Navigator helps businesses capitalise on new opportunities and make informed decisions for the future by understanding the outlook for international trade.

Interviews for the Navigator: Now, next and how survey were conducted in Argentina, Australia, Bangladesh, Belgium, Brazil, Canada, Egypt, France, Germany, Greece, Hong Kong SAR, India, Indonesia, Ireland, Italy, Japan, mainland China, Malaysia, Mexico, the Netherlands, Poland, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, Turkey, the UAE, the UK, the US, and Vietnam.

Over 5,000 of the companies interviewed were SMEs making annual sales of between US$5m and US$50m, with the remainder being larger enterprises.

The full Global report can be accessed here: www.business.hsbc.com/trade-navigator

1OECD: Economic Outlook for Southeast Asia, China and India 2018: FOSTERING GROWTH THROUGH DIGITALISATION