Export Companies: "Even if Exports Increase This Year, Recovery to Pre-Pandemic Levels Is 'Not Yet'"... Impact of COVID-19

FKI Announces Survey Results on Export Companies
"Impact of COVID-19, Full Recovery Expected After Next Year"

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Major export companies expect the scale of exports to increase by more than 7% this year due to economic recovery following the distribution of COVID-19 vaccines and the base effect from last year's export decline. However, these companies anticipate it will be difficult to recover to the 2018 level before the pandemic. Nine out of ten of these companies forecast that the impact of COVID-19 will be fully overcome only after next year.

On the 31st, the Federation of Korean Industries (FKI) announced that export companies responding to the '2021 Export Outlook and Exchange Rate & Trade Issue Review' survey, conducted among about 100 major Korean export companies, expected exports to increase by 7.4% compared to the previous year. The FKI explained that this result reflects the base effect from last year's export decline due to COVID-19, economic recovery following vaccine development, and easing of US-China trade tensions.

In particular, exports in key industries such as semiconductors, automobiles, and ships are expected to increase significantly this year, leading to a positive turnaround in exports across all industries for the first time in three years. The semiconductor sector is expected to see a 10.2% increase in exports this year, automobiles 13.9%, ships 109.8%, general machinery 6.7%, steel 7.7%, and petroleum products 23.0%, according to industry forecasts.

However, the FKI judged that "recent export growth rates have recorded negative figures for two consecutive years, and the impact of COVID-19 is expected to continue this year, making it still difficult to recover to pre-pandemic export levels."

About 90% of export companies responded that the economic damage caused by COVID-19 would be fully recovered by 2022. In particular, 45.1% answered that recovery would occur in the first half of next year, and 29.4% expected recovery only in the second half of next year. Only 11.8% of companies expected full recovery within this year, while 13.7% anticipated the effects to remain until 2023, exceeding the proportion expecting recovery this year.

Regarding the timing of the easing of economic impacts caused by COVID-19, 49.0% responded "the second half of this year," followed by "the first half of next year" (30.4%), "the second half of next year" (11.8%), and "after 2023" (5.9%). While full economic recovery is expected to require waiting until next year, there is a forecast that the impact of COVID-19 will somewhat ease starting from the second half of this year.

Among Korea's top 10 export countries, China (29.4%) was identified as the country expected to improve the most. Despite the impact of COVID-19, China recorded positive GDP growth of 2.3% last year and surpassed 100 trillion yuan in GDP for the first time in history. This year, an economic growth rate in the 8% range is forecast, and China is expected to show relatively strong recovery among major countries despite COVID-19, raising expectations among Korean export companies.

Following China, export companies expected recovery in the United States (27.5%), Japan (9.8%), Vietnam (8.8%), Taiwan (1.0%), and India (1.0%). In the case of the US, recovery in consumption is anticipated due to expanded vaccination and large-scale economic stimulus measures by the new Joe Biden administration.

Half of the export companies viewed the "degree of COVID-19 spread" as the key factor in this year's trade environment. Other key issues included "US-China trade disputes" (22.2%), "strengthening environmental regulations" (15.5%), and "spread of protectionism" (10.4%). Regarding the US-China trade dispute, 44.1% expected it to be similar to last year, while 43.1% anticipated some easing.

This year, export companies identified "resurgence of COVID-19" (38.6%) as the most burdensome factor in the global business environment. Other concerns included increased volatility in the won-dollar exchange rate, US-China trade disputes, changes in global environmental regulations, expansion of protectionist measures, digital transformation, and ESG (environmental, social, and governance) management. The average won-dollar exchange rate used as a basis for business planning by export companies this year was 1,100 won, and the average breakeven exchange rate was 1,093 won.

Kim Bongman, Director of International Cooperation at the FKI, said, "As global COVID-19 vaccinations accelerate, expectations for economic recovery in the second half of the year may increase. Our companies need to proactively prepare for the possibility of global economic recovery, and the government should also strive to create a favorable trade environment by mitigating won-dollar exchange rate volatility and supporting the development of new markets such as Southeast Asia."

Meanwhile, the FKI stated that this survey was conducted from the 11th to the 22nd among 686 major export companies selected from the top 1,000 companies by sales in 2019, with 102 companies responding.

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