Chart of the Day: Tightening DRC could slash food services' earnings by 2.2%

Staff costs are projected to rise 10% in 2020 and 2021.

This chart from DBS shows the expected increase in staff costs and decline in net profit amongst food service and grocery retailers companies as Singapore proposed to tighten the dependency ratio ceiling from 40% to 38% in 2020 and 35% in 2021.

Also read: Singapore Budget 2019 Full Coverage: GST going to 9%, duty free booze allowance cut, $1.1b bicentennial bonus

This could lead to a decline in earnings for food services and grocery retailers to 2.2% and 0.7% respectively in the next two years. In 2019, the decrease in net profit could hit 0.9% and 0.3%.

Staff costs are projected to rise 10% in 2020 and 2021.

“The result is minimal as it first reflects only the Singapore side of staff costs, and secondly, only a 5% reduction (from 40% to 35% DRC) in foreign headcount within Singapore,” said Alfie Yeo, analyst at DBS.

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