Improvement in Corporate Sentiment: Are Local Regions an Exception?

Manufacturing Business Sentiment Index (BSI) Still Weak in Jeju, Incheon, Gangneung, etc.
Concentration of Large and Export Companies in the Capital Region is the Cause

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] As the semiconductor industry shows signs of improvement compared to last year, the manufacturing sector's business sentiment is gradually getting better; however, the business sentiment among regional companies remains sluggish. In particular, the manufacturing sectors in Jeju, Incheon, and Jeonnam are showing signs of continued stagnation. This is attributed to the concentration of large corporations and export companies, which have a significant impact on business sentiment improvement, in the Seoul metropolitan area.

According to the Bank of Korea on the 12th, the Business Survey Index (BSI) for the manufacturing sector in Jeju stood at 52, down 2 points from the previous month. The manufacturing BSI in Jeju has declined for eight consecutive months since May last year (86) and is at its lowest level since February 2013. The manufacturing BSI in Incheon also recorded 52, continuing a downward trend since the second half of last year.

The manufacturing BSI in Gangneung fell below 50 to 46. After recording a historic low of 42 earlier last year, it has been hovering between 40 and 50. Incheon was also identified as a region where manufacturing companies’ business sentiment is weak. In January, Incheon’s manufacturing BSI was 52.

*Bank of Korea

The BSI uses 100 as the baseline; a value above 100 indicates that more companies expect the business climate to improve compared to the previous quarter, while a value below 100 indicates the opposite.

The BSI is derived from a survey of companies in each region regarding sales, financial conditions, employment, production, and investment. Therefore, it is difficult to simply compare regional economies based solely on absolute figures. However, looking at the trend, it is true that the business sentiment perceived by regional companies is lower than the national average. The overall manufacturing BSI for January was 76.

One reason for the weak business sentiment among regional companies is that major large corporations and export companies are concentrated in the Seoul metropolitan area. Looking at the overall manufacturing BSI for January, the large corporations’ BSI rose 3 points from the previous month to 83, while small and medium-sized enterprises increased by only 1 point to 69, supporting this observation.

The non-manufacturing sector also showed sluggish performance in regional areas. The non-manufacturing BSI in the Gwangju-Jeonnam region dropped sharply by 6 points from 77 in December last year to 71, and Incheon’s non-manufacturing BSI plunged from 57 to 48. Jeju also showed a downward trend, falling from 61 to 57.

Meanwhile, the January BSI does not yet reflect the impact of the novel coronavirus infection (Wuhan pneumonia), so it is interpreted that regions heavily affected by the virus likely experienced negative effects on the February BSI. The February BSI will be announced on the 26th.

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