Hankyung Research Institute "Corporate Sentiment Shrinks Rapidly Due to COVID-19 Spread"

BSI February Performance Hits Lowest in 132 Months Since February 2009 Amid Global Recession Signs

[Asia Economy Reporter Ki-min Lee] It has been revealed that corporate sentiment is rapidly deteriorating due to the spread of the novel coronavirus infection (COVID-19).

The Korea Economic Research Institute under the Federation of Korean Industries announced on the 25th that the Business Survey Index (BSI) for the top 600 companies by sales recorded a forecast of 84.4 for March this year, down 7.6 points from this month's forecast of 92.0. The BSI is an index created by surveying business owners' opinions on future economic trends, directly reflecting the perceived business climate of companies. A BSI value below 100 means that more companies expect the economy to worsen than improve, while a value above 100 indicates that more companies expect economic improvement.

By sector for the March forecast, domestic demand (86.5), exports (89.7), investment (91.8), financing (93.1), employment (95.4), and profitability (93.1) all recorded below the baseline. Inventory, which is considered excessive when above 100, was 102.5.

The Korea Economic Research Institute noted that although the 7.6-point drop in the March forecast compared to the previous month is smaller in absolute terms than during SARS (-11.7 points) and MERS (-12.1 points), COVID-19 is still in its early stages and ongoing, so its impact could be greater than in the past.

The institute reported that 80.1% of all surveyed companies said their business was affected by COVID-19, and 14.9% responded that the negative impact was significant. Industries significantly affected by COVID-19 were travel (44.4%), transportation (33.3%), automotive (22.0%), petroleum and chemical products (21.2%), and wholesale and retail (16.3%), in that order. Additionally, companies identified the biggest affected areas as domestic demand contraction (35.6%), production disruptions (18.7%), and export declines (11.1%).

Companies answered that the impact of COVID-19 was large due to production stoppages caused by Chinese factories not operating and decreased production volume due to reduced demand in China.

This month's actual performance index was 78.9, marking the lowest point in 132 months since February 2009, when it recorded 62.4 amid the global economic recession and financial crisis. The BSI forecast, which had been rising since December last year, turned pessimistic. By sector, domestic demand (79.6), exports (85.4), investment (89.5), financing (92.0), inventory (102.3), employment (95.4), and profitability (88.1) were all below the baseline, the Korea Economic Research Institute explained.

Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, said, “Even a week before this survey began, optimistic views on COVID-19 prevailed, yet the economic outlook recorded 84.4.” He added, “With COVID-19 entering a new phase including secondary and tertiary infections in the community, the perceived business climate among companies is likely to be lower than the surveyed figures.”

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