SINGAPORE – Rising costs of utilities, fuel and other costs have contributed to rising costs for businesses in Singapore, but businesses are still profitable, said Minister of State for Trade and Industry Low Yen Ling in Parliament on Tuesday.
Gross profits for businesses here have increased by 9.8 per cent year-on-year on average in the second quarter of this year, although this is lower than the 10.1 per cent rise recorded in the previous quarter.
The increase in profits in the second quarter come on the back of higher business costs in the manufacturing and services sectors.
The unit business cost of the manufacturing sector rose by 5.2 per cent, on a year-on-year basis in the second quarter of this year, extending the 4 per cent increase of the previous quarter, while the unit business cost of the overall service sector rose by 7.2 per cent year-on-year in the first quarter, following a 7.9 per cent increase in the previous quarter, added Ms Low.
While businesses remain profitable, the Government will continue to monitor business costs closely and provide support when needed, Ms Low said.
She was responding to a question from Mr Seah Kian Peng (Marine Parade GRC) on the trend of business costs in Singapore.
A confluence of external and domestic factors have caused costs to increase, said Ms Low, citing how global energy prices have risen sharply from a year ago.
These prices are also expected to remain elevated given the ongoing Russia-Ukraine war and supply chain disruptions.
She added: “This has, in turn, raised the costs of utilities, fuel and transportation, among other costs, for Singapore businesses. Domestically, the tight labour market will continue to exert upward pressure on labour costs.”
The increases in unit business costs in the manufacturing and service sectors – which is the business cost incurred to produce a unit of output in each sector – are in stark contrast to what businesses saw five years ago.
The manufacturing sector saw a 7 per cent per year decline in unit business cost between 2017 and 2021, while the overall service sector saw a 1.9 per cent per year increase between 2017 and 2021.
Some relief schemes that the Government has put out to help businesses cope with these rising costs include the Progressive Wage Credit Scheme, where wage increases of lower-wage workers are co-funded from this year to 2026, said Ms Low.
In a separate reply to another question in Parliament on Tuesday, Ms Low said both the retail and hotel sectors, which were hard-hit by the pandemic, have seen strong recovery.
She said both sectors have recovered to comparable levels in 2019 before the Covid-19 pandemic, with retail sales even exceeding 2019 levels.
Total retail sales excluding motor vehicles hit about $3.4 billion in July this year, while hotel room revenue for July was about $319 million.
She added that industry transformation maps for the retail and hotel sectors will be launched later this year to help ensure that their manpower resources, supply chains, operations and revenues are more resilient against pandemics and other disruptions.