COVID-19 Spread Leads to Worst Corporate Sentiment... Exports and Large Corporations Decline

Bank of Korea Announces April Business Survey Index and Economic Sentiment Index

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] As the novel coronavirus infection (COVID-19) spreads, the business sentiment index in April fell to the lowest level ever recorded. It is at the same level as right after the financial crisis in December 2008.

According to the "April Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released by the Bank of Korea on the 29th, the business condition BSI, which shows the overall industry's perceived business conditions this month, was 51, down 3 points from the previous month. Although the decline was smaller than last month’s (-11 points), the index was the lowest since the related statistics began being compiled in January 2003. It is the same figure as the overall industry business condition BSI (51) in December 2008 during the global financial crisis.

The overall industry business condition BSI has continued to decline for three consecutive months, from 75 in January when COVID-19 cases first occurred in Korea, to 65 in February, 54 in March, and 51 this month.

BSI is an indicator that surveys entrepreneurs' judgments and outlooks on their current business conditions. A score of 100 or below means that negative responses outnumber positive ones. The lower the number, the worse the perceived business conditions. This survey was conducted from the 13th to the 21st nationwide, targeting 3,696 corporate enterprises (3,180 respondents).

Breaking it down by company characteristics, the manufacturing industry business condition BSI fell 4 points to 52, the lowest since February 2009 (43). The indices for large enterprises (59), small and medium enterprises (45), export companies (55), and domestic companies (51) all declined together following the previous month. Although the decline was smaller than the previous month, it is notable that the indices for large enterprises (-6 points) and export companies (-8 points) dropped more than those for small and medium enterprises (-1 point) and domestic companies (no change). This reflects the shrinking sentiment of domestic export large enterprises as COVID-19 spreads worldwide.

Kang Chang-gu, head of the Corporate Statistics Team at the Bank of Korea’s Economic Statistics Bureau, explained, "The April manufacturing business condition BSI declined mainly due to electrical equipment (-12 points), automobiles (-10 points), and electronic, video, and communication equipment (-3 points). The sluggish exports of front industries (automobiles), automobile parts, and electronic components related to semiconductors and communication equipment had an impact."

The non-manufacturing BSI fell 3 points from 53 last month to 50, setting a new record low again. The sluggish sales of industrial electricity and gas and the decrease in construction orders were the reasons for the decline in the non-manufacturing business condition BSI. However, the business condition BSI for arts, sports, and leisure rose as golf course visitors increased.

The business outlook for May predicted by companies was even gloomier. The overall industry business outlook BSI dropped to 50, the lowest level since January 2009 (49). However, the decline in the business outlook BSI was 3 points, smaller than the 16-point drop in the April outlook.

The Economic Sentiment Index (ESI), calculated by combining the corporate sentiment index and the consumer sentiment index, fell 8.0 points to 55.7. This is the lowest figure since December 2008 (55.5). The seasonally adjusted and irregularity-removed ESI cyclical component dropped 6.7 points to 64.5.

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