Companies are more optimistic with plans of expansion and aggressive hiring.
This chart from UOB shows that business investments finally rose by 2.2% YoY in Q4 2017 after five previous quarters of consecutive contractions. They caught up with private consumption expenses, which grew 5.5% YoY.
UOB noted that with more profits, companies are more optimistic about the future and will be more eager to expand their operations, hire more workers and increase business investments.
The bank said business optimism was a result of higher corporate profits, which have increased healthily and expanded 6.9% YoY in 2017. This is the fastest pace since 2010. The quick pace of corporate profits expansion showed up in the higher-than-expected contribution to government’s 2017 revenue via the corporate income tax revenue.
Corporate income tax (CIT) was the largest source of Singapore's operating income in 2017, taking up 20% of the total.
“It is probably with the improving business environment that Budget 2018 had considerably less focus on shorter-term economic measures,” said UOB economist Francis Tan. Based on UOB's calculations, the focus on short-term economic measures had dropped to 13% of total economic measures in Budget 2018, from 25% in Budget 2017.
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