Singapore CFOs Upbeat About Economic Outlook

Finance executives are generally upbeat about the economic outlook for the coming months, but have comparatively more tempered expectations about their company’s performance, according to American Express’ Business Momentum Survey, which polled both Singapore and Hong Kong-based CFOs.

 

Slightly more than half of Singapore respondents (53%) said they expected modest to substantial economic expansion in the coming year, buoyed by a growing local economy and steady business growth. A large proportion (42%) also expected their company’s business performance to improve, with the remainder predicting current performance to stay the same (42%) or a dip (15%) in performance.

 

Those expecting to do better said their businesses were growing or projected to grow. A range of factors including unfavourable market conditions, business contraction, and a stagnant global economy were cited by the more cautious group.

 

In Hong Kong, respondents displayed less optimism about their market’s economic outlook compared to those in Singapore, with only 20% expecting modest or substantial economic expansion, and a majority (59%) expecting no change. Despite this, CFOs in Hong Kong remain positive about their company outlook, with 42% expecting business performance to increase.

 

Key challenges for businesses
Although businesses are hopeful of their prospects for the year, they highlighted several areas where they will need to focus their efforts in order to compete.

 

These include industry competition (84%), currency volatility (76%) and labour cost (67%).  Improving current products and services was at the top priority for almost a quarter (22%) of respondents. Also high on the list was a focus on developing new products, when finance executives look at tackling the competitive environment.

 

A number of finance executives also cited emerging markets as important drivers for growth. This is particularly important within Asia, as the top five emerging markets for CFOs in Singapore are in this region:-  Indonesia (40%), Vietnam (25%), China (24%), Malaysia (24%) and India (16%).

 

“With companies here so reliant on emerging markets for growth due to our proximity to these booming economies, it is important for CFOs to gain a thorough understanding of the business environment and cultural norms of doing business abroad, and to be aware of the potential pitfalls, so that they can maximise opportunities to steer their companies forward to bolster and sustain growth,” says Melanie Cochrane, American Express Senior Vice President of Global Corporate Payments, for the Asia-Pacific region.

 

Managing costs

In order to take advantage of Singapore’s strong economic performance, CFOs are looking for new ways to effectively manage their costs and improve productivity.For example, as high turnover rates and manpower shortages continue to persist in Singapore, 57% of respondents expect an increase in labour cost in the coming months, driven by the need to retain talent (88%), support company expansion (53%) and meet regulatory requirements like foreign wage levies (38%). In response, some CFOs said that they would look to keep their best people by offering better training opportunities to existing employees, enhancing employment schemes, and exploring automation solutions.

 

As for business travel, 31% of respondents expect to spend more in order to meet with current or prospective customers.

 

To keep these costs down, finance executives said the most popular approaches to improving cost efficiency were improving operational efficiencies (83%), working capital management (64%), employing technological advances (58%) and consideration for supplier contract renewals (58%).

 

“This is an area that can be further explored to help companies better manage their costs. In an economy where every dollar counts, there is a greater need for companies to increase savings by evaluating their procurement, travel and entertainment expenses. This is even more important to Small and Medium-sized Enterprises (SMEs) whose key to survival is cash flow efficiency, which can be achieved by identifying solutions to better track incremental costs that are central to driving growth in their business,” said Cochrane.

 

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