'Corona Shock' Companies Say "Impact 30% Greater Than During IMF Crisis... Recovery Will Take Over a Year"

42.3% of Companies Say "COVID-19 Impact Greater Than IMF Foreign Exchange Crisis"
"This Year's Performance Expected to Decline 20% YoY... Reduction in New Hiring and Investment"

The perceived impact of the COVID-19 crisis on our economy (Source: Korea Employers Federation)

[Asia Economy Reporter Kim Ji-hee] A survey revealed that major companies feel the economic shock caused by the COVID-19 pandemic much more severely than during the IMF foreign exchange crisis or the global financial crisis. Additionally, a significant number of these companies expect their sales to decrease by more than 20% this year.

According to the "Corporate Awareness and Status Survey Related to the COVID-19 Situation" released by the Korea Employers Federation on the 10th, responding companies felt the economic shock from COVID-19 about 30% more intensely than during the IMF foreign exchange crisis or the global financial crisis. This survey was conducted on 223 companies affected by the COVID-19 situation.

The average shock perception score of the responding companies was 134.4 for the COVID-19 situation, compared to 100 for the global financial crisis and 104.6 for the IMF foreign exchange crisis. This means that companies currently perceive the economic shock from COVID-19 as 34.4% greater than the global financial crisis and 28.5% greater than the IMF foreign exchange crisis.

42.3% of all responding companies answered that the COVID-19 shock was greater than the IMF foreign exchange crisis shock, while 22.1% said the shocks from the two economic crises were similar.

The Korea Employers Federation analyzed, "Although simple economic indicators (including forecasts) such as the first quarter growth rate or annual growth rate projections are not as severe as during the foreign exchange crisis, many companies perceive the economic shock from COVID-19 to be greater than that of the IMF foreign exchange crisis. This is presumed to reflect anxiety about the deepening crisis due to the fact that this crisis originated in the real economy and the difficulty in predicting the scope and intensity of the crisis going forward."

Regarding this year's annual performance, 7 out of 10 responding companies gave a negative outlook. 72.4% of companies expected their sales to decrease by more than 20% compared to the previous year, and 70.6% anticipated operating profits to decline by more than 20% during the same period. Particularly, companies with fewer than 300 employees showed stronger negative perceptions. 70% of small-scale companies expected their operating profits to decrease by more than 30% this year.

The period required for business conditions to recover to the pre-COVID-19 situation (Source: Korea Employers Federation)

Furthermore, companies expect the COVID-19 crisis to continue for a considerable period. 40.3% of responding companies predicted that it would take 'more than one year' for business conditions to recover to pre-COVID-19 levels. Responses indicating '6 months to 1 year' accounted for 31.8%. Additionally, 17% responded that it is difficult to estimate how long it will take (long-term recession).

Companies affected by COVID-19 are also considering reducing new hires and investments. 26.5% of all responding companies said they would reduce new hires compared to their original plans, and 22.4% responded that they would cut new investments. The intention to reduce hiring and investment was slightly higher among large companies with 300 or more employees than among small and medium-sized enterprises with fewer than 300 employees.

Companies emphasized that improving flexible work arrangements is urgent to overcome the COVID-19 crisis. 37.8% of all responding companies selected flexible work arrangements as the most urgent labor-related law or system to improve. Regardless of company size, the proportion choosing to improve flexible work arrangements was high; in particular, more than half of companies with 300 or more employees answered that flexible work arrangements need improvement.

Other areas identified for improvement included ▲improving dismissal requirements (18.9%) ▲improving procedures for changing employment rules (14.9%) ▲improving regulations on fixed-term and dispatched workers (9%).

Meanwhile, the most commonly implemented measure by companies in response to the COVID-19 situation was 'minimizing face-to-face work such as canceling business trips and events' (83%). This was followed by 'providing hygiene products (masks, etc.)' at 73.5%, and 'strengthening disinfection within workplaces' at 62.8%.

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