“Ah! Busan Manufacturing...” Busan Chamber of Commerce and Industry Announces ‘Economic Outlook’

Busan Manufacturing Industry Faces Multiple Adversities, Worst Outlook for Q3
Q3 Manufacturing Index at '52'... Lowest Since 48 During the Foreign Exchange Crisis

Quarterly BSI Performance and Outlook Trends.

[Asia Economy Yeongnam Reporting Headquarters Reporter Kim Yong-woo] Dark clouds are gathering over the future of Busan's manufacturing industry.

Amid global concerns over the resurgence of COVID-19 and the rekindling of trade conflicts between the U.S. and China, negative factors are piling up, forecasting the worst situation for Busan's manufacturing industry in the third quarter.

The Busan Chamber of Commerce and Industry released the results of the "3rd Quarter Busan Manufacturing Industry Outlook" survey conducted on 250 major local manufacturing companies on the 24th.

According to the survey, the business outlook index, which gauges the perceived business climate of Busan's manufacturing industry in the third quarter, recorded a score of 52. This is the lowest level since the third quarter of 1998, when companies faced mass bankruptcies during the IMF financial crisis, which recorded 48, indicating the severity of the current crisis facing the local manufacturing sector.

The business outlook index is based on 100; a score above 100 indicates economic improvement, while below 100 indicates economic downturn.

By management sector, the sales outlook index recorded 53, followed by operating profit at 54. Due to declining sales, financial soundness is expected to deteriorate, worsening funding conditions. In fact, the funding condition outlook index was 65, significantly lower than the previous quarter's 73.

By industry, unprecedentedly low business levels are expected across all surveyed sectors. In particular, parts and materials companies in the region, suffering from a sharp decline in sales and operating rates due to global demand contraction caused by COVID-19 and reduced demand in related upstream and downstream industries due to the recession, are expected to face the worst season.

Looking at industries, the primary metals sector is expected to have the worst business conditions among local manufacturing industries, with a third-quarter outlook index of 19 due to decreased demand in upstream and downstream industries.

The automotive parts industry is also expected to continue deteriorating, with an outlook index of 26, as overseas finished vehicle plants halt production, Renault Samsung Motors ends outsourced production of the Rogue, and additional export allocations are delayed.

The machinery and equipment and shipbuilding equipment sectors recorded indices of 47 and 73 respectively, indicating difficulty in escaping the recession.

Business conditions of companies in the second quarter compared to the first quarter related to COVID-19.

The business performance of the local manufacturing industry in the second quarter was also confirmed to have mostly declined. 68.8% of all surveyed companies responded that their business conditions worsened in the second quarter compared to the first quarter due to COVID-19. The sharp drop in the manufacturing business performance index to 39 in the second quarter is also related to this.

Although the all-out damage caused by COVID-19 is intensifying, 76% of surveyed companies reported having no capacity to respond, raising further concerns. Only 24% of companies had prepared or were implementing their own countermeasures.

Regarding support measures to respond to COVID-19, demands for "employment stability policies" and "financial and tax support" were the highest at 32.4% and 30.8%, respectively. Other demands included "domestic demand revitalization" at 19.6%, "investment activation and regulatory improvement" at 8.8%, and "overseas marketing support" at 8.3%.

A representative from the Busan Chamber of Commerce and Industry explained, "The concern among businesspeople that the second half of the year will be worse than the first half seems to be materializing through this survey."

As the impact of COVID-19 prolongs, the manufacturing sector, which failed to properly conduct order activities in the first half, is beginning to suffer, making it highly likely that production activities and the employment market will be immediately impacted in the second half.

The representative added, "Additional measures are needed, such as expanding the scale of financial and tax support and proactively relaxing employment retention support requirements so that companies can prepare for a long-term battle."

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