COVID-19 Third Wave Leads to Gloomy January Business Outlook for Small and Medium Enterprises

January 2021 Business Outlook Index at 65.0, Down 7.0p from Previous Month
Significant 25.7p Decline in 'Accommodation and Food Service' Sector, Key Industry for Small Business Owners

Due to the resurgence of COVID-19, small and medium-sized enterprises (SMEs) have expressed a negative outlook on the economy for January next year. The Korea Federation of SMEs announced on the 30th that this was the result of the "January 2021 SME Economic Outlook Survey." Photo by Yonhap News Agency

[Asia Economy Reporter Kim Heeyoon] Due to the resurgence of COVID-19, small and medium-sized enterprises (SMEs) have expressed a negative outlook on the economy for January next year.

The Korea Federation of SMEs announced on the 30th that it conducted the 'January 2021 SME Economic Outlook Survey' targeting 3,150 SMEs from the 14th to the 21st, revealing these results.

In this survey, the SME Economic Outlook Index stood at 65.0, down 7.0 points from the previous month. Compared to the same month last year, it dropped by 16.3 points.

In particular, due to the strengthening of social distancing measures amid the third wave of COVID-19, the index, which had been maintained in the 70s for three consecutive months since October (October (71.2) → November (74.0) → December (72.0)), turned downward again.

The Korea Federation of SMEs explained, "Domestic demand contraction and internal and external uncertainties appear to have negatively affected the perceived economy of SMEs."

The manufacturing sector's economic outlook for January was 75.3, down 3.1 points from the previous month (down 6.7 points compared to the same month last year). The non-manufacturing sector was 59.6, down 9.1 points from the previous month (down 21.3 points compared to the same month last year). Construction (66.8) fell by 8.2 points, and the service sector (58.2) dropped by 9.2 points.

Within the non-manufacturing sector, construction fell by 8.2 points (75.0 → 66.8), and the service sector decreased by 9.2 points (67.4 → 58.2) compared to the previous month. Among service industries, lodging and restaurants, which are the main sectors for small business owners, dropped sharply to 28.1, down 25.7 points from the previous month.

The major difficulties faced by SMEs were dominated by sluggish domestic demand (70.2%). Rising labor costs (40.1%), excessive competition among companies (35.4%), and delayed payment collection (21.9%) followed.

The average operating rate of small and medium-sized manufacturing firms in November 2020 was 70.2%, up 0.7 percentage points from the previous month but down 2.9 percentage points compared to the same month last year.

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