"This Year's Economic Growth Rate Below 3%... Economy Unlikely to Recover Soon"

Junggi Research Institute Announces 2022 Small and Medium Business Outlook

2022 Domestic Economic Outlook

[Asia Economy Reporter Kim Cheol-hyun] An analysis has emerged that South Korea's economic growth rate in 2022 will not exceed 3%, and the country's economy will not recover for the time being. The Korea Institute for Small and Medium Enterprises and Startups (President Oh Dong-yoon) estimated the economic growth rate for this year at 2.9% in its '2022 Small Business Outlook' report released on the 2nd, forecasting private consumption to increase by 3.8% and merchandise exports by 2.8%.

Small and medium enterprises (SMEs) are expected to experience widening gaps between industries and scales due to a 'K-shaped' recovery. Small and medium manufacturing production is projected to slightly increase from 1.9% to 2.1%, but it is expected to be difficult to recover to the 2019 level due to the prolonged impact of COVID-19. On the other hand, small and medium service industries are expected to exceed pre-COVID-19 levels as their growth rate rises from 3.5% to 5.2%.

However, uncertainty is increasing due to strengthened quarantine measures following the recent spread of the Omicron variant. SME exports are expected to slow down, while employment numbers will slightly increase. SME exports are expected to decrease in growth rate from 16.3% to 4.3% due to the base effect from last year's significant growth. The number of SME employees is expected to rise from 24.44 million to 24.62 million, an increase of 0.7% (180,000 people), but the proportion of SMEs in total employment is expected to decline to 89.4%.

According to a survey of SMEs, 78.6% responded that South Korea's economy is in crisis, and only 4.8% believed the economic crisis would recover this year. The response that the economic crisis will not recover for the time being increased by 31.0 percentage points to 64.0% compared to the December 2020 survey result (33.0%), indicating a delay in the expected timing of economic crisis recovery. Despite the base effect from poor business performance in 2021, negative outlooks dominated for sales, operating profit, investment, and employment for this year's business activities.

Regarding the business outlook for the next five years, only 27.9% of SMEs responded that business performance would improve. The proportion of SMEs that answered that manpower supply and demand would improve over the next five years was only 18.6%. The most needed policies for SMEs were resolving the gap between large and small-medium enterprises (38.8%), securing and retaining excellent personnel (36.6%), and technological innovation and productivity improvement (32.2%), in that order. This survey was conducted from December 1 to 10 among 580 SMEs with five or more employees, analyzed with a 95% confidence level and a margin of error of ±4.07 percentage points.

Researcher Noh Min-seon of the Korea Institute for Small and Medium Enterprises and Startups emphasized, "This year, SME business activities will face intensified uncertainty between With-Corona and Post-Corona," adding, "It is necessary to closely examine the extent of cost increases and loan repayment burdens for SMEs due to soaring prices and interest rate hikes." Furthermore, Researcher Noh proposed key policy tasks including expanding compensation for losses to small business owners who cooperated with quarantine measures, continuing domestic demand stimulation policies such as consumer coupon distribution, introducing a delivery price linkage system, establishing loan programs with debt repayment exemptions, and strengthening information provision and legal advice for exporting SMEs.

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