SMEs face a 2026 ‘growth wall’ as OCBC index hits 50.8 peak

Double-digit cashflow growth masks a dangerous slump in healthcare and business services.

Singapore’s small and medium enterprises (SME) continued their expansion for the third consecutive quarter in the last three months of 2025, backed by higher collections and payments.

According to OCBC’s fourth quarter (Q4) 2025 Report, the OCBC SME Index rose to 50.8 during the said period, remaining in expansionary territory for the third consecutive quarter. This also reflects an increase from the previous quarter’s 50.5.

“SMEs rounded off the year on a positive note with a strong performance in Q4 2025. This was accompanied by an 11.8% increase in overall collections and 10.7% increase in overall payments year-on-year,” the report read.

SMEs in manufacturing, ICT, and wholesale trade continue to be the main drivers of growth despite the macroeconomic headwinds. Against softer consumer demand and a tougher operating environment, SMEs in the building & construction, retail and education sectors stayed resilient.

ICT continues to register a consecutive healthy expansion at 51.1 in Q4, thanks to Data Processing and Software Development (50.9), and ICT Manufacturing and Sales (50.5) segment. The IT Consultancy (49.6) segment weighed down on the performance of the industry.

Manufacturing also remains on an upward growth trajectory, logging 51.0. The expansion was primarily driven by Precision Engineering (50.9) and Consumer Products manufacturing (50.8).

Also recording expansion is the Transport & Logistics, settling at 50.1. Growth in the industry was driven by the Land Transport segment (50.6). The Sea Transport (49.8) and Logistics (48.6) segments continue to remain in contraction, exerting a drag on the performance of the industry.

Building & Construction rose to 50.3, with a healthy year-on-year increase in overall collections (18%) and payments (19%). The performance of the industry is driven largely by expansions in the Construction segment (50.3). The Building Materials segment remained in contraction (49.4) and exerted a drag on the performance of the industry.

Education improved to 50.3, driven by expansions in Early Childhood Education (50.6). Business activities within Training Centres (50.8) also increased, likely driven by individuals utilising their Skills Future credits ahead of the end of 2025 expiry.

Food & Beverages (F&B) was neutral with a reading of 50.0. Whilst SMEs in the Food Farming and Food Manufacturing segments provided some lift to overall performance, growth was muted due to weaker activity in the downstream value chain. F&B Wholesale Trade and F&B Retail trade saw a slowdown, with readings of 49.8 and 49.2, respectively.

Business Services contracted marginally with a reading of 49.8. The performance of the industry was predominantly weighed down by contraction in both the Business Consultancy (49.7), Advertising and Exhibition (49.2) segments.

Healthcare registered a contraction at 49.7 this quarter. The lacklustre performance of the industry can be attributed primarily to contractions in the Healthcare Distributor (49.7) and Healthcare Provider (49.8) segments, year-on-year.

Experts have said that SMEs are expected to greatly benefit from updated e-commerce rules that aim to give clearer, more practical direction on how to operate in increasingly complex online marketplaces.

“Whilst growth momentum from Q4 2025 could carry into the first few months of 2026, the outlook for 2026 is likely to ease, coming from a high base in 2025, due to higher operating costs and stronger market competition in the region,” said Elaine Heng, head of Global Commercial Banking, OCBC.