ICT Economic Recovery Halted by COVID-19... Bleak Outlook for March

[Asia Economy Reporter Seulgina Jo] The business outlook for companies in the information and communication technology (ICT) sector has also weakened due to the impact of the novel coronavirus infection (COVID-19). The March business outlook has worsened further. Companies have requested the government to expand financial support, provide tax reductions, and offer research and development (R&D) and technical assistance.

According to the ICT Business Survey Index (BSI) conducted by the Korea Information and Communication Industry Promotion Association and the Korea Electronics and Telecommunications Industry Promotion Association from February 17 to 21, the comprehensive business performance BSI for February (current month business conditions) was 85, deteriorating from 105 in the previous month. A BSI above the baseline of 100 indicates more positive responses about the economy, while below 100 indicates more negative responses.

The performance BSI falling below the baseline of 100 in February is interpreted as a result of sluggish main products combined with domestic demand weakness due to the COVID-19 impact. Large enterprises (49.5%) cited domestic demand as the biggest factor, while small and medium enterprises (53.7%) pointed to intensified competition.

Trends in BSI in the ICT Sector

The monthly performance BSI in the ICT sector dropped to the 80s in the second half of last year, recovered to 105 in January, and then fell back to the 80s. Looking in detail, inventory, production facilities, employment, facility investment execution, and financial conditions all worsened compared to the previous month in February. By sector, information and communication broadcasting equipment (84), information and communication broadcasting services (82), and software (88) all deteriorated.

The ICT business outlook is expected to worsen further in March, when the COVID-19 pandemic was declared globally. The released March forecast BSI was 92, falling to the 90s for the first time in three months. This indicator had exceeded the baseline of 100 just the previous month. This means that ICT companies’ expectations for business improvement have sharply cooled. Considering that the survey period was right after confirmed cases began to surge domestically, the actual business conditions in March are likely to be even worse.

As policy recommendations for revitalizing the ICT industry, for information and communication broadcasting equipment, expanding financial support (62.7%, multiple responses allowed), tax reductions (57.1%), and R&D and technical support (45.2%) were suggested. For information and communication broadcasting services, expanding financial support (65.0%), R&D and technical support (50.5%), and tax reductions (45.8%) were proposed.

For the mid- to long-term focus areas, artificial intelligence (AI), 5G mobile communications, smart devices, cloud, and digital content were highlighted. For information and communication broadcasting equipment, AI (47.5%) ranked first, while for information and communication broadcasting services and software, 5G mobile communications (64.8%, 59.8%) were the top priorities respectively.

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