Hankyung Research Institute "Corporate Sentiment Recovery Slowed by Prolonged COVID-19... Liquidity Support Measures Needed"

June BSI Outlook (68.9) Slightly Up from May (61.8)
Manufacturing Financing Conditions Outlook 73.9, Lowest in 11 Years Since Global Financial Crisis

[Asia Economy Reporter Ki-min Lee] As the novel coronavirus infection (COVID-19) prolongs, the speed of improvement in corporate sentiment appears to be slow.

The Korea Economic Research Institute announced on the 26th that the Business Survey Index (BSI) conducted on the top 600 companies by sales recorded a June outlook of 68.9.

Although this is a 7.1-point increase from last month (61.8), it still failed to surpass the 70 mark, indicating a predominantly negative outlook. The actual performance in May was 70.6, continuing a 61-month streak of sluggishness.

BSI is an index derived from surveying business owners' opinions on future economic trends, directly reflecting the perceived business climate. A BSI value below 100 means more companies expect economic deterioration than improvement, while a value above 100 indicates more companies foresee economic improvement.

In the June outlook, all sectors including domestic demand (71.4), exports (71.1), investment (77.0), funds (78.2), inventory (104.8), employment (85.2), and profitability (76.2) fell short of the baseline.

By industry, the outlook was lowest in the order of automobiles (42.1), clothing and footwear (50.0), medical and precision machinery (50.0), non-metallic minerals (55.0), and metals and metal processing (55.2). Companies responded that due to the prolonged COVID-19 situation, demand recovery is slow and domestic and export markets remain sluggish because of ongoing shutdowns at major overseas factories.

In particular, the fund condition outlook for manufacturing was 73.9, the lowest in 11 years since January 2009 (66.4) right after the global financial crisis. This is analyzed to be due to shrinking cash flow from poor business activities and deteriorating loan conditions from financial institutions. The Korea Economic Research Institute pointed out that some companies have failed to extend loans due to credit rating downgrades and are also facing difficulties in collecting overseas accounts receivable.

The Korea Economic Research Institute stated that although the economic outlook rose slightly compared to last month, the recovery speed is slower than during past economic crises. After hitting the lowest point (52.0) in January 2009, the index rose 24.1 points within two months, whereas in this crisis, after recording the lowest point (59.3) in April, it only increased by 9.6 points over two months.

The Korea Economic Research Institute forecasted that the economic outlook will remain bleak as both demand and supply have been shocked by COVID-19 amid the weakened fundamental strength of the Korean economy.

The actual performance in May recorded 70.6, remaining below the baseline for 61 consecutive months. By sector, all areas including domestic demand (74.2), exports (72.0), investment (76.8), funds (82.6), inventory (107.3), employment (84.9), and profitability (78.4) were below the baseline.

Choo Kwang-ho, head of economic policy at the Korea Economic Research Institute, said, "As COVID-19 prolongs, it is difficult to predict the continuation of the recovery trend," adding, "It is necessary to prepare active liquidity support measures such as simplifying fund support procedures so that companies can overcome the economic shock."

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