Companies' August Economic Outlook Also Negative: "Recovery Uncertain"

[Asia Economy Reporter Changhwan Lee] The Korea Economic Research Institute announced on the 29th that the Business Survey Index (BSI) for 600 major companies based on sales recorded a forecast of 81.6 for August.

Although this figure rose by 7.9 points (p) compared to last month (73.7), it still remained well below the baseline of 100, the institute explained.

A BSI above the baseline of 100 indicates that the number of companies viewing the future business environment positively exceeds those viewing it negatively, while a figure below 100 indicates the opposite.

By sector for the August forecast, all areas recorded below the baseline: domestic demand (82.7), exports (83.0), investment (83.3), funds (88.3), inventory (105.6), employment (88.0), and profitability (85.1).

Companies pointed to not only the prolonged impact of COVID-19 but also seasonal factors such as reduced operating days and capacity utilization due to summer vacations, as well as deteriorating profitability caused by rising electricity and raw material prices as reasons for the negative economic outlook.

By industry, the non-manufacturing sector, which includes services, saw a significant increase in sentiment compared to the previous month (+18.1p) with a BSI of 90.5, but the manufacturing sector (74.9) showed almost no change with a 0.1p increase, remaining stagnant at last month’s level.

The Korea Economic Research Institute stated that the rise in the August forecast was solely due to the increase in the non-manufacturing sector’s outlook without any improvement in manufacturing, making it difficult to view the overall economy optimistically.

In particular, during the global financial crisis and the IMF foreign exchange crisis, manufacturing outlooks rose by an average of 11.9p and 7.3p per month respectively over three months after hitting their lowest points, whereas in the current crisis, the average monthly increase over the same period was only 5.4p.

Unlike past crises where manufacturing showed a V-shaped recovery, the Korea Economic Research Institute explained that the current crisis is seeing a Nike-shaped recovery scenario, where economic recovery is occurring at a much slower pace.

The July actual figure recorded 84.2, showing a slight increase from the previous month (74.2), but it remained below the baseline for 63 consecutive months. By sector, all areas recorded below the baseline: domestic demand (84.5), exports (86.0), investment (82.5), funds (90.4), inventory (106.4), employment (88.3), and profitability (87.1).

Choo Kwang-ho, head of economic policy at the Korea Economic Research Institute, said, “In addition to the second quarter economic growth rate recording a lower-than-expected -3.3%, the recovery in business sentiment, especially in manufacturing, has been delayed, making the economic outlook for the second half unclear.” He emphasized, “It is necessary to establish policies from a mid- to long-term perspective to resolve domestic and external uncertainties and to revitalize corporate activities, rather than relying on short-term patchwork measures.”

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