'Corona Shock' Causes Biggest Drop in Corporate Sentiment

February Business Survey Index at 65, Down 10P from Previous Month
Decline Larger Than During MERS and Financial Crisis

[Asia Economy Reporter Kim Eunbyeol] The business sentiment index, which had been rising since the end of last year, plummeted due to fears of the novel coronavirus infection (COVID-19). The level of business sentiment was the lowest in four years, and the decline was the largest ever recorded. As business sentiment rapidly cools following consumer sentiment, the government's expectation of a 'V-shaped' rebound is becoming increasingly distant.

According to the 'February 2020 Business Survey Index (BSI)' released by the Bank of Korea on the 26th, the overall industry BSI this month was 65, down 10 points from the previous month. This is the lowest figure since February 2016 (63). The BSI is an indicator that reflects the business conditions perceived by companies; a figure below 100 means that more companies view the economy pessimistically than optimistically.

The decline was also the largest since the Bank of Korea began compiling statistics in 2003. The drop in the overall industry BSI was greater than during the Middle East Respiratory Syndrome (MERS) outbreak in June 2015, the global economic downturn caused by the European debt crisis in July 2012, and the 2008 financial crisis. The previous largest decline was 9 points.

Regardless of classification such as large enterprises, small and medium enterprises, export companies, or domestic companies, the outlook was negative. The manufacturing industry BSI recorded 65, down 11 points from the previous month (76). The manufacturing BSI is also the lowest since February 2016 (63), and the decline matches the 11-point drop during the spread of the European debt crisis in July 2012. The manufacturing business index had fallen to 68 in August last year but showed improvement until last month; however, it sharply dropped this month reflecting the impact of COVID-19. A Bank of Korea official said, "Exports of electronic components related to semiconductors and displays decreased, and production at finished car manufacturers was temporarily halted due to parts supply disruptions." The non-manufacturing business index fell sharply by 9 points to 64 compared to the previous month. This is also an unusual drop in over five years, matching the previous low of 64 in February 2016.

Businesses' outlook for March is also pessimistic. The manufacturing industry's March business outlook BSI fell 8 points from the previous month to 69, and the non-manufacturing industry's March business outlook BSI dropped 6 points to 68.

The Consumer Confidence Index (CCSI) for February, announced by the Bank of Korea the day before, recorded the third-largest drop ever. The Economic Sentiment Index (ESI), calculated by combining the BSI and the Consumer Sentiment Index (CSI), fell 8.5 points from the previous month to 87.2. This is the lowest since March 2009, following the financial crisis. This indicates that not only households but also major entities such as businesses are shaken by COVID-19.

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