Despite the Spread of COVID-19, Corporate Sentiment Rebounds in January After One Month

Bank of Korea 'January 2021 Business Survey Index (BSI) and Economic Sentiment Index (ESI)'

*Bank of Korea

[Asia Economy Reporter Kim Eun-byeol] Despite the spread of the novel coronavirus infection (COVID-19), corporate sentiment improved in January compared to the previous month.

According to the "January 2021 Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released by the Bank of Korea on the 28th, the overall industry business condition BSI in January was 77, up 2 points from the previous month. The overall industry BSI had fallen to 75 in December last year during the third wave of COVID-19, but it rebounded after one month.

However, since the business condition BSI still remains below 100, corporate sentiment is sluggish. The BSI is surveyed by the Bank of Korea targeting 3,255 corporate entities nationwide, and a value above 100 indicates improved corporate sentiment.

Both manufacturing and non-manufacturing sectors saw an increase in their business condition BSI. Manufacturing rose 3 points to 85, while non-manufacturing increased 6 points to 70.

In manufacturing, sectors such as rubber and plastics (+14 points) and metal processing (+13 points) led the increase. This was due to the global economy recovering from the COVID-19 shock, which boosted demand for automobile materials and upstream industries.

By company size in manufacturing, large enterprises (91, +2 points) and small and medium enterprises (78, +4 points) all rose simultaneously. By type, export companies (96, +7 points) saw an increase in business condition BSI, while domestic companies (78) maintained the previous month's level. Sales, profitability, and financial conditions forecasts all improved.

Regarding the biggest concerns in management, manufacturing respondents cited uncertain economic conditions, sluggish domestic demand, and weak exports.

In non-manufacturing, the business condition BSI for information and communication fell by 4 points, but electricity, gas, and steam (+14 points) and wholesale and retail trade (+11 points) rose, resulting in a 2-point increase compared to the previous month. The slowdown in COVID-19 spread in January significantly contributed to the recovery of domestic demand.

Non-manufacturing companies pointed to uncertain economic conditions and sluggish domestic demand as difficulties in business activities. However, the proportion citing difficulties due to government regulations rose by 1.7 percentage points from 5.7% in the previous month to 7.4%. This is interpreted as non-manufacturing companies experiencing challenges in business operations due to heightened social distancing measures amid COVID-19.

Meanwhile, the Economic Sentiment Index (ESI) in January recorded 93.1, up 7 points from the previous month. The cyclical component of the ESI, calculated by removing seasonal and irregular fluctuations from the original series, rose 2.8 points from the previous month to 92.7.

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