Export-driven backbone: Singapore SMEs expand for a third straight quarter

(Singapore, Jan 21) Singapore’s small and medium-sized enterprises (SMEs) maintained their expansion momentum in the fourth quarter of 2025, with export-oriented sectors outperforming domestically driven industries. Manufacturing, information and communications technology (ICT), and wholesale trade continued to be the main engines of SME growth.

However, growth prospects over the next year may moderate amid rising operating costs and intensifying competition. A survey found that about 36% of SMEs cited market competition as their biggest challenge over the next six months, while 20% viewed geopolitical risks as the top concern.

According to the OCBC SME Index released by Oversea-Chinese Banking Corporation (OCBC) on Tuesday (Jan 20), the index rose to 50.8 in 4Q2025 from 50.5 in the previous quarter, marking the third consecutive quarter in expansion territory. Based on transaction data from more than 100,000 OCBC SME customers, a reading above 50 indicates business expansion compared with the same period a year earlier, while below 50 signals contraction.

The report showed robust performance in 4Q2025, with total receipts rising 11.8% year-on-year and total payments increasing 10.7%, both accelerating from the prior quarter. Sector performance was uneven: retail (51.5), ICT (51.1) and manufacturing (51.0) were among the strongest, while healthcare (49.7) and business services (49.8) contracted.

OCBC’s outlook survey broadly aligned with the index, indicating export-oriented business owners were more optimistic about recent conditions than domestically focused firms, and also more upbeat about the next six months.

Speaking at a media briefing, OCBC Global Commercial Banking Head Wang Yin Xuan said many SMEs are increasingly concerned that an influx of overseas competitors is disrupting established market dynamics. “Competition is not just about more players,” she noted. “New entrants are bringing different ‘rules of the game’.” She added that these firms often expand rapidly with strong capital backing and enter the market with more digital membership programmes and ecosystem strategies, reshaping the competitive landscape.

Operating cost pressures—particularly rent and manpower expenses—were also highlighted as a major headwind. OCBC data showed that total wage expenditure for domestically driven SMEs rose 10% in 4Q2025.

Looking into 2026, Wang said SME growth could slow under the twin pressures of higher costs and intense competition. She also highlighted SMEs’ expectations for the upcoming budget, including measures to ease operating costs, more flexible manpower policies—especially regarding foreign labour—and support for training and retaining older workers.

SMEs are also focused on adopting digitalisation, automation and artificial intelligence. Wang stressed that policy support should not be “one-size-fits-all”, but tailored to different business needs. The survey further found that 37% of SMEs plan to expand overseas, and many are calling for a one-stop platform to provide more comprehensive support for international expansion beyond existing programmes.

Wang concluded that the current shift is fundamentally about business-model disruption, and the key is to help SMEs innovate and redesign their models through practical pathways and room to experiment.