South Korea’s manufacturing sector and exports are locked is a systemic crisis with companies bracing for uncertain times in the new year, a poll showed Sunday.
The survey on the country’s 600 largest companies in terms of sales showed 81.6 percent of firms believed economic conditions have deteriorated to serious levels, according to the Federation of Korean Industries (FKI).
In contrast, only 17.8 percent said the current situation is a temporary development brought on by various external changes, and any fallout will not fundamentally affect the general trend toward recovery, the federation said.
According to the findings, 58.0 percent of the companies that responded to the poll claimed corporate performance in such areas as profits and sales for 2014 fell shy of targets set earlier in the year. Just under 29 percent said they met their targets, with the rest saying they surpassed expectations.
Nearly 36 percent of the companies cited weak domestic consumption as the key reason for the general poor showing, with 20.1 percent blaming the sluggish global economic recovery.
Of the total, 19.6 percent said fierce competition negatively affected them the most, with 8.3 percent citing a volatile foreign exchange rate as the culprit for tough times.
On when the economy will make a recovery, 48.1 percent predicted any upturn will not occur until 2016, with 43.1 percent forecasting things will improve in the second half of 2015.
“Many companies clearly do not think recovery will be forthcoming anytime soon,” the FKI said.
It pointed out that 34.1 percent of the companies checked predicted national growth will hover in the 3.0-3.5 percent range in 2015, which is much lower than the finance ministry’s prediction of 4 percent. The poll showed 24.3 percent predicting growth to surpass 3.5 percent but remain below 4 percent, with 23.7 percent forecasting growth will move in the 2.5-3.0 percent region.
The Bank of Korea announced it expected Asia’s fourth-largest economy will grow 3.9 percent in the new year.
For 2015, 53.4 percent of large companies said business conditions will not be too different from this year, with 26.1 percent expecting some improvements, while the rest said conditions could worsen.
The survey also showed 51.2 percent of companies saying they will spend about the same amount of money on investment in the new year compared to 2014, with 65.9 percent responding the hiring of workers will be kept at this year’s level. Others said they will have to cut back on the number of people they employ.
In regards to what developments could affect performance in 2015, 36.7 percent cited low growth and deflation, with 27.2 percent saying the possible delay in global economic recovery poses challenges.
Companies then called on the government to do more to encourage companies to make investments and to maintain current expansionary macroeconomic policies.
“There is a need for policymakers to take note of the fact that companies view the current economic situation as a crisis,” said Kim Yong-ok, head of FKI’s economic policy team. He argued that in light of economic uncertainties facing the country, it is imperative for policymakers to try to stimulate growth and help companies strengthen their competitiveness. (Yonhap)
