Manufacturing Industry in Gwangju Region Experiences 5 Consecutive Quarters of 'Slump'

[Asia Economy Honam Reporting Headquarters Reporter Park Seon-gang] The business sentiment outlook of manufacturing companies in the Gwangju region continues to remain sluggish in the third quarter.

The Gwangju Chamber of Commerce and Industry (Chairman Jeong Chang-seon) announced on the 1st that the Business Survey Index (BSI, base value=100) for the third quarter of 2020, surveyed among 145 manufacturing companies in the Gwangju area, was recorded at '70.'

Although this figure rose by 6 points from the previous quarter (64), it still falls significantly below the base value (100), indicating that the sense of economic stagnation among local manufacturers is expected to persist in the third quarter.

The manufacturing sector's business sentiment has been weak for five consecutive quarters.

This is interpreted as a concern over prolonged demand decline due to economic activity contraction, as the economy has yet to fully recover from the COVID-19 recession and signs of a second wave of COVID-19 have emerged.

By industry, all sectors forecast continued economic sluggishness, with all falling below the base value (100).

The 'Automotive Parts (72→63)' sector saw worsened business sentiment due to domestic and overseas economic downturns caused by the spread of COVID-19, along with factory shutdowns at Kia Motors. The 'IT & Home Appliances (68→88)' sector, despite expectations of increased demand for major seasonal appliances like air conditioners, forecast a negative outlook for the third quarter due to reduced demand for parent company products amid domestic and international economic contraction.

The 'Machinery & Molds (53→54)' and 'Food & Beverage (75→67)' sectors anticipate continued sluggish business sentiment due to domestic demand contraction and export declines caused by COVID-19. The 'Chemicals, Rubber & Plastics (53→80)' sector, despite increased demand for quarantine and hygiene products, still fell below the base value (100) due to increased economic uncertainty and parent companies relocating overseas.

The 'Steel & Metal Processing (53→83)' sector forecasted worsening conditions due to decreased order volumes and continued domestic demand weakness, despite the resumption of economic activities in major export countries such as the U.S. and Europe. The 'Glass, Cement & Concrete (117→83)' sector expressed concerns over economic downturn due to reduced construction starts caused by COVID-19, as well as entering the off-season for construction due to the rainy season and rising temperatures.

By company size, both large enterprises (85→70) and small and medium enterprises (60→68) expected economic downturn.

In particular, the outlook for large enterprises (85→70) worsened by 15 points from the previous quarter. This is attributed to concerns over decreased demand in major sectors such as automobiles, despite the third quarter being the peak season for summer seasonal appliances, due to increased domestic and international uncertainties caused by COVID-19.

By export scale, both export companies (64→76) and domestic companies (64→68) showed slight improvements from the previous quarter. However, business sentiment remains negative as the economy has yet to overcome the impact of COVID-19 and concerns over a second wave continue to suppress domestic and international activities.

Regarding government support policies that should be expanded and strengthened to overcome the COVID-19 crisis, 'Financial and tax support such as scale expansion and payment deferral (55.9%)', 'Revitalization of domestic demand and consumption (50.3%)', and 'Support for exports and overseas marketing (42.8%)' accounted for high proportions, followed by 'Support for employment retention and stability (22.8%)' and 'Investment activation through regulatory improvement (13.8%)'.

When asked about preparations for the post-COVID-19 era, 49.0% (71 companies) responded that they have no capacity to respond as they are focused on minimizing COVID-19 damage, 41.4% (60 companies) said they are preparing countermeasures, and 9.7% (14 companies) said they have prepared and are implementing countermeasures.

Major countermeasures included 62.2% focusing on strengthening R&D activities and developing core technologies and capabilities. Other responses included changes in production and work environments such as digital processes, non-face-to-face/online meetings, and telecommuting systems (36.5%), reviewing diversification of parts/material procurement and export regions due to changes in the Global Value Chain (GVC) (35.1%), and considering industry transition and business restructuring into new and convergent industries (17.6%).

Regarding the most urgent tasks for the 21st National Assembly to prioritize for economic recovery, 60.0% answered 'Preparation of laws to activate investment and consumption,' and 53.8% said 'Supplementary budget and other COVID-19 damage response measures.' Other necessary measures included 'Enhancing labor market flexibility (34.5%)', 'Avoiding corporate burden legislation such as the Fair Trade Act (22.1%)', and 'Laws to foster service and new industries (6.2%).'

A Gwangju Chamber of Commerce official said, "As the impact of COVID-19 continues, the business sentiment of manufacturing companies is not recovering easily," adding, "Efforts to activate investment and consumption, along with institutional support and countermeasures to overcome COVID-19 damage, are urgently needed."

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