"Corporate Sentiment in Q1 Next Year to Recover to Pre-COVID-19 Levels"

[Asia Economy Reporter Ki-min Lee] Due to the recent recovery in exports and growing expectations for overseas COVID-19 vaccinations, the manufacturing sector's business sentiment for the first quarter of next year has rebounded to levels seen just before the COVID-19 pandemic. However, uncertainties such as the third domestic resurgence, vaccine supply delays, and escalating US-China tensions have led to a predominance of negative outlooks over positive ones.

The Korea Chamber of Commerce and Industry (KCCI) announced on the 29th that its survey of over 2,300 manufacturing companies nationwide on the '2021 Q1 Manufacturing Business Survey Index (BSI)' showed a 17-point increase from the previous quarter, reaching 75. A BSI below 100 indicates that more companies expect the business climate to worsen in the next quarter.

According to KCCI, the BSI was 75 in the first quarter of this year but remained in the 50s consecutively from the second to the fourth quarter amid the spread of COVID-19. The recent rise in BSI is attributed to the start of COVID-19 vaccinations in major countries worldwide and the export growth of 4% in November compared to the same period last year, followed by a 1.2% increase in exports from December 1 to 20, which helped ease corporate fears somewhat.

However, no industry sector recorded a BSI above the benchmark of 100, indicating expectations of improvement. The BSI by industry was as follows: ▲Automobiles & Parts (86) ▲Publishing & Printing (84) ▲IT & Home Appliances (79) ▲Refining & Petrochemicals (77) ▲Machinery (75) ▲Medical Precision (75) ▲Pharmaceuticals (74) ▲Food & Beverage (72) ▲Textiles & Apparel (70) ▲Steel (70) ▲Cosmetics (66) ▲Shipbuilding & Parts (62).

Regionally, the BSI in all areas nationwide fell short of the benchmark. Particularly, the Gangwon (51) region, where ski resorts and sunrise tourist spots were closed due to social distancing measures, and Jeju (63), which saw a surge in confirmed cases this month, showed sluggish performance.

However, Jeonnam (94), home to many steel and refining-petrochemical companies, performed relatively well compared to other regions, buoyed by rising steel prices due to increased global steel demand and expectations of a base effect in the refining-petrochemical sector.

Due to uncertain market conditions and ongoing issues such as COVID-19, 84.3% of companies reported being unable to establish business plans for next year. Furthermore, corporate investment is expected to contract somewhat. Among companies that completed their business plans, 63.7% described their 'new year business operation plans' as 'conservative,' significantly outnumbering the 36.3% who described them as 'aggressive.' Of these companies, 82.2% responded that increased COVID-19 uncertainties forced them to adopt a cautious management approach.

Kim Moon-tae, head of the Economic Policy Team at KCCI, emphasized, "Given the significant domestic and international uncertainties and the many companies still experiencing temporary difficulties, efforts to continue government support until a stable recovery of our economy is confirmed are necessary. At the same time, fundamental measures to enhance our economy's dynamism through innovation of outdated regulations from a mid- to long-term perspective must be pursued in parallel."

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