"Prolonged COVID-19... Sharp Decline in Non-Manufacturing Business Sentiment"

January Comprehensive Business Survey Index (BSI) Outlook at 91.7

[Asia Economy Reporter Dongwoo Lee] The perceived business conditions in the non-manufacturing sector have sharply declined due to the third wave of the novel coronavirus infection (COVID-19).

The Korea Economic Research Institute announced on the 29th that the Business Survey Index (BSI) for 600 major companies by sales recorded a comprehensive business outlook of 91.7 for January. This figure decreased by 7.2 points compared to the previous month, reflecting a deepening negative economic perception amid the third wave of COVID-19. The December performance figure (93.4) also fell by 4.6 points from the previous month, continuing the sluggish trend.

By industry, the perceived business conditions in the non-manufacturing sector, including services (86.9), dropped sharply by 16.3 points month-on-month due to concerns over domestic demand contraction caused by intensified social distancing, whereas manufacturing (95.2) maintained the previous month's level with a slight 0.3-point change. Notably, during the first wave of COVID-19 in March-April, both manufacturing and non-manufacturing sectors saw their outlooks fall by more than 20 points, suffering a direct hit, but during the third wave period (December-January), only the non-manufacturing sector's outlook plunged, showing a contrast.

Regarding this, the Korea Economic Research Institute analyzed that in the manufacturing sector, recent favorable semiconductor market conditions and recovery in upstream industries leading to increased orders have somewhat offset the negative economic perceptions caused by COVID-19. However, the institute explained that due to the ongoing spread of COVID-19 and heightened uncertainty, it is difficult to predict whether this trend will continue.

Looking at the outlook by sector, all areas including domestic demand (90.4), exports (93.9), investment (89.3), financial conditions (92.3), inventory (101.9), employment (90.1), and profitability (91.5) recorded below the baseline. An inventory index above 100 indicates negative responses (excess inventory). In particular, the financial conditions BSI showed a significant expansion of negative outlook by 6.9 points compared to the previous month, influenced by delayed payment collections and worsening loan conditions due to credit rating downgrades.

The Korea Economic Research Institute added that with the recent rapid increase in corporate debt levels, ongoing difficulties in financial conditions raise serious concerns about corporate insolvency.

The December performance figure was 93.4, with the decline from the previous month (4.6 points) widening. By sector, domestic demand (96.7), exports (92.8), investment (93.7), finance (96.4), inventory (99.4), employment (92.3), and profitability (93.1) all recorded below the baseline except for inventory, continuing the sluggish trend.

Choo Kwang-ho, head of the Economic Policy Office at the Korea Economic Research Institute, stated, “The corporate sentiment, which had somewhat recovered, is declining again due to the third wave of COVID-19,” and emphasized, “Bold shifts in economic policy direction are necessary to raise corporate expectations for economic recovery.”

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