Gwangju Chamber of Commerce: Manufacturing Sector's Q1 Sentiment Remains 'Stagnant'

[Asia Economy Honam Reporting Headquarters Reporter Park Seon-gang] The sentiment of manufacturing companies in the Gwangju area remained negative in the first quarter.

The Gwangju Chamber of Commerce and Industry (Chairman Jeong Chang-seon) announced on the 16th that the '2020 Q1 Business Survey Index (BSI)' for 160 manufacturing companies in the Gwangju area showed a forecast of 79, down 7 points from the previous quarter (86).

The Business Survey Index (BSI) quantifies corporate sentiment, where a value below the baseline (100) indicates that more companies expect the economy to worsen compared to the previous quarter, while a value above 100 means more companies anticipate improvement.

The manufacturing sector's sentiment has been declining for three consecutive quarters, attributed to prolonged US-China trade disputes, domestic demand contraction, ongoing economic downturns both domestically and internationally, worsening construction conditions, and decreased demand for major seasonal home appliances, all suggesting continued stagnation.

By industry, only 'Food and Beverage' (86→107) expected improved sentiment in Q1 compared to Q4 due to increased product demand from holiday season effects, while all other sectors forecasted a bleak outlook.

'Automotive Parts' (89→71) failed to rebound in sentiment despite strong sales from new car launches, due to decreased production and export volumes caused by domestic economic downturn and worsening external conditions. 'IT, Electrical, and Electronics' (86→72) showed concerns over sluggish demand for key seasonal appliances like air conditioners and kimchi refrigerators, as well as government regulations such as the 52-hour workweek.

'Chemicals, Rubber, and Plastics' (47→76) did not see sentiment improvement due to falling export prices from prolonged US-China trade disputes, construction sector contraction, and weak domestic demand. 'Steel and Metal Processing' (67→74) faced off-season effects, domestic economic slowdown, worsening construction conditions, and strengthened industrial safety regulations. 'Glass, Cement, and Concrete' (111→17) experienced a sharp decline due to reduced deliveries and orders in the winter season and concerns over deteriorating construction conditions.

'Machinery' (100→95) anticipated difficulty in sentiment recovery despite expectations of increased orders, due to worsening construction conditions and domestic market contraction.

By company size and type, both large enterprises (77→90) and small and medium enterprises (87→78) are expected to continue experiencing stagnation due to domestic demand contraction and increased economic uncertainties at home and abroad.

Among responses, 70.0% of large enterprises expected sentiment to remain 'unchanged from the previous quarter,' whereas 42.9% of small and medium enterprises anticipated 'deterioration,' showing a particularly negative outlook.

Meanwhile, export companies (97→120) exceeded the baseline (100) due to new investments from overseas clients in Southeast Asia and Europe despite external concerns like the US-China trade dispute, whereas domestic companies (82→68) forecasted a gloomy outlook due to domestic recession and worsening construction conditions.

Regarding 'major domestic risks this year,' 'prolonged domestic recession' was the most cited at 44.8%, followed by 'changes in employment environment such as minimum wage and 52-hour workweek (28.1%)' and 'investment sentiment contraction (14.7%).'

For 'major external risks,' 'US-China trade dispute and protectionism' accounted for the largest share at 39.1%, followed by 'investment sentiment contraction (23.0%)' and 'slowdown in China's economic growth (21.9%).'

Compared to last year, 71.3% responded that their business plans for this year are 'conservative,' while only 28.8% described them as 'aggressive.'

The primary reason for choosing 'conservative' was 'increased uncertainty' at 72.7%, followed by 'expanded volatility in raw material prices (16.5%)' and 'lack of investment opportunities due to domestic market saturation (8.3%).'

Regarding economic policies the government should prioritize during the remaining term, 'flexible application of employment and labor policies (50.0%)' was the most selected, followed by 'recovery of export and investment momentum (30.3%),' 'drastic regulatory reforms (14.0%),' and 'activation and scale-up of venture startups (5.6%).'

A representative from the Gwangju Chamber of Commerce and Industry stated, "The prolonged domestic recession and US-China trade disputes, combined with seasonal off-seasons and worsening construction conditions, are making it increasingly difficult for local manufacturing companies to recover their economic sentiment. It is urgent to improve conditions for corporate investment and trade by easing labor policies and implementing regulatory reforms to revitalize the economy."

This content was produced with the assistance of AI translation services.