Q3 Mid-sized Companies Economic Outlook Hits Lowest Since Survey Start... "Impact of COVID-19"

Junggyeonryeon Announces Results of '2020 Q3 Mid-sized Companies Economic Outlook Survey'

[Asia Economy Reporter Kim Cheol-hyun] It has been confirmed that concerns among mid-sized companies about the overall economy continue to expand due to the impact of the novel coronavirus infection (COVID-19).

According to the "2020 Q3 Mid-sized Companies Economic Outlook Survey" released by the Korea Federation of Mid-sized Enterprises on the 5th, the economic outlook index for mid-sized companies in the third quarter was recorded at 75.2, down 3.5 points from the previous quarter. This was 22.9 points lower than the highest point recorded in Q4 2018. The "Mid-sized Companies Economic Outlook Survey" began in Q3 2017 to provide a basis for establishing effective policies to foster mid-sized companies, and after a three-year period of strengthening survey validity through sample design and question refinement, the results were disclosed for the first time this year. The current economic outlook index, conducted from May 27 to June 10 targeting 500 mid-sized companies, represents the lowest point since the survey began.

The biggest reason for the negative outlook was a decrease in domestic demand (81.9%), followed by a decrease in overseas demand (40.1%), excessive competition among companies (22.8%), and difficulties in financing (16.5%). Additionally, mid-sized company representatives anticipated that the impact of COVID-19 would not be short-lived. 33.6% of respondents expected the ripple effects of COVID-19 to last up to one year, and 22.7% expected it to continue for more than one year. A representative from the Federation stated, "Most companies are enduring through unavoidable measures such as postponing new investments (19.9%), salary cuts and workforce reductions (16.4%), and temporary closures (13.7%), but 39.3% of mid-sized companies have not found any specific countermeasures," adding, "Strong government policy support is necessary to overcome the crisis."

Specifically, the manufacturing sector index fell 9.2 points from the previous quarter to 70.8, whereas the non-manufacturing sector rose 0.6 points to 78.0. In the manufacturing sector, the indices for food and beverage and electronic components industries rose 19.1 points and 6.2 points respectively from the previous quarter, reaching 80.4 and 104.5. The indices for metal and chemical industries fell 22.2 points and 19.6 points respectively, to 60.9 and 60.0. In the non-manufacturing sector, the publishing, communication, information, and transportation industries saw increases, while construction and real estate rental industries declined.

The domestic demand outlook index fell 4.3 points from the previous quarter to 77.8, and the export outlook index dropped 12.2 points to 72.1. This marked the first time since Q4 2018 that the domestic demand outlook index surpassed the export outlook index. The domestic demand outlook index declined in all manufacturing and non-manufacturing sectors except publishing, communication, information, food and beverage, transportation, and wholesale and retail. The export outlook index showed a significant decline in manufacturing sectors such as metal and automobile, marking the largest drop since Q3 2019.

The manufacturing production outlook index fell to 74.1, declining in all sectors except food and beverage. The automobile sector recorded the lowest at 58.3. The production facility outlook index increased 4.0 points from the previous quarter to 106.7, and the product inventory outlook index rose 4.6 points to 109.7. The Federation explained that the negative outlook on excess production facilities and inventory depletion reflects the desperate recognition among mid-sized companies of demand decreases due to the global economic downturn following COVID-19.

In response, mid-sized company representatives identified tax support such as corporate tax cuts (50.8%) as the top priority policy to alleviate management difficulties caused by COVID-19. Most respondents argued that a comprehensive policy package to overcome the crisis should be activated, including emergency operating fund loans (27.0%), resolving difficulties in immigration and customs clearance (10.2%), and quarantine support for resuming operations (10.0%). Particularly, in the automobile sector, the urgency for emergency operating fund loans was highest at 77.8%. The Federation emphasized that since the automobile industry has significant industrial linkage effects, resolving liquidity difficulties in this sector due to COVID-19 will be an urgent remedy for the overall economy.

Ban Won-ik, Executive Vice Chairman of the Federation, said, "This result clearly confirms the serious management difficulties faced by the majority of mid-sized companies regardless of industry or size due to COVID-19," adding, "As the crisis situation with an uncertain end continues, in addition to hastening tailored short-term support policies precisely targeting field needs, we must gather wisdom from all sectors of society to comprehensively improve the legal and institutional environment in preparation for the post-COVID-19 era."

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