As Vaccinations Begin, SME Economic Outlook Shows 'Increase' for Three Consecutive Months

Economic Outlook Index Up 4.3p for Third Consecutive Month
"Vaccine Rollout Boosts Recovery Expectations... Disaster Relief Funds Also Impact"
6 out of 10 SMEs Cite 'Domestic Demand Slump' as Major Challenge
Innovative Manufacturing Operating Rate Notably Rises 4.3%p

The business outlook for small and medium-sized enterprises (SMEs) showed an increasing trend for three consecutive months. The Korea Federation of SMEs announced on the 30th that this was the result of the "April 2021 SME Business Outlook Survey."
[Image source=Yonhap News]

[Asia Economy Reporter Junhyung Lee] The business outlook for small and medium-sized enterprises (SMEs) showed an increase for the third consecutive month, driven by expectations of economic recovery following COVID-19 vaccinations.

The Korea Federation of SMEs announced on the 30th that the Small Business Health Index (SBHI) for next month's business outlook rose by 4.3 points to 80.5, based on a survey conducted from the 15th to the 22nd of this month targeting 3,150 SMEs. An SBHI above 100 indicates that more companies have a positive outlook on the economy than those with a negative outlook, while a value below 100 indicates the opposite.

Trend of Small and Medium Business Outlook Economic Index (SBHI).
Photo by Korea Federation of SMEs

The SBHI recovered to the 80-point range for the first time since February last year (81.2), right after the COVID-19 outbreak. The business outlook decreased from 72 in December last year to 65 in January this year but has risen for three consecutive months in February (69.3), March (76.2), and April. The Federation stated, "The full-scale rollout of COVID-19 vaccinations has increased latent optimism about economic recovery," adding, "The government's fourth round of disaster relief funds also had a positive impact."

Expectations for economic recovery were observed across all industrial sectors. The business outlook for manufacturing and non-manufacturing industries rose by 1.9 points and 5.5 points to 88.2 and 76.5, respectively. Within non-manufacturing, construction increased by 5.4 points to 79.9, and services rose by 5.5 points to 75.8 compared to the previous month.

By category, domestic sales increased from 76.2 to 80.8, and exports rose from 87.2 to 92.6. The outlook for operating profits and financial conditions improved from 72.7 and 76.2 to 76.1 and 76.9, respectively. Employment outlook declined for the second consecutive month, but the rate of decrease slowed from 0.4 points to 0.2 points.

Specifically, in manufacturing, 17 sectors showed an upward trend, led by 'Beverages' (84.1→97.2) and 'Automobiles and Trailers' (93.3→104.5). Conversely, five sectors including 'Other Transport Equipment' (95.6→87.5) and 'Metal Fabricated Products' (91.1→84.2) saw a decline in business outlook. In services, eight sectors including 'Arts, Sports, and Leisure-related Services' (52.3→74.8) and 'Educational Services' (57.9→75.3) experienced an increase in business outlook.

Management difficulties cited by small and medium-sized enterprises.
[Photo by Korea Federation of SMEs]

This month, six out of ten SMEs cited sluggish domestic demand as their main difficulty. Excessive competition among companies (40.6%), rising labor costs (39.6%), and increasing raw material prices (32.3%) followed as other major challenges.

Regarding factory operating rates, innovative manufacturing showed a notable increase. Last month, the average operating rate for innovative manufacturing was 75.1%, up 4.3 percentage points from the previous month. In contrast, the average operating rate for general manufacturing fell by 0.1% to 69.4%. The average operating rate for small and medium manufacturing rose by 0.2 percentage points to 69.8% compared to the previous month.

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