"Q2 Economy in Gyeonggi-do Difficult Due to 'Ukraine Invasion'... Non-metallic Minerals 'Rain'... Auto, Refining & Petrochemicals 'Cloudy'"

KCCI Manufacturing Business Outlook Index Below Benchmark at 96
"Prolonged Russia-Ukraine War, Ongoing Risks in International Oil Prices and Raw Materials"

Container unloading operations underway at Busan Port Gamman Pier on the 21st. (Image source=Yonhap News)

[Asia Economy Reporter Moon Chaeseok] Domestic manufacturing companies expressed concerns that although the economy slightly recovered in the second quarter, there are numerous risk factors such as the Russia-Ukraine war and the global rise in raw material prices. In particular, the non-metallic minerals, automobile and auto parts, and petrochemical and refining industries diagnosed the second quarter economy as unfavorable.

On the 27th, the Korea Chamber of Commerce and Industry announced that the '2022 Q2 Business Survey Index (BSI)' conducted on 2,166 manufacturing companies nationwide was recorded at 96, up 7 points from the first quarter. A BSI below 100 means more companies view the economy negatively, while above 100 means more companies view it positively.

Recent trends of the Business Survey Index (BSI) for the economy surveyed by the Korea Chamber of Commerce and Industry. (Source: Korea Chamber of Commerce and Industry)

Although the BSI index slightly increased, companies find it difficult to view the economy optimistically due to numerous management risks such as the Ukraine crisis and rising international oil and raw material prices. By industry, non-metallic minerals (85), refining and petrochemicals (91), automobiles and parts (93), steel (98), food and beverage (96) still affected by COVID-19, and shipbuilding and parts (99) facing labor shortages showed predominantly negative outlooks.

By region, all areas except Sejong (100) and Gyeongnam (107), which has many shipbuilding and parts companies, fell below 100. Among them, Gyeonggi (80), with many automobile and parts companies, and Gangwon (83), with a high proportion of non-metallic minerals, recorded the lowest figures. Regions such as Daegu (88) and Ulsan (88), heavily influenced by refining, petrochemicals, and automobile parts, as well as Jeonnam (90), Gyeonggi (90), and Jeju (94), did not exceed the baseline. Gwangju (109), Gangwon (103), Gyeongnam (102), Daejeon (101), and Chungbuk (101) exceeded the baseline.

BSI by Industry for Q2. (Source: Korea Chamber of Commerce and Industry)

Companies cited 'increased production costs due to rising raw material prices' (82.5% response rate) as their biggest concern in the second quarter. This was followed by 'domestic demand slump due to COVID-19 effects' (51.4%), 'increased interest expenses due to interest rate hikes' (33.0%), 'production disruptions due to global supply chain issues' (28.1%), and 'implementation of corporate burden laws such as the Serious Accident Punishment Act' (24.1%).

Regarding the economic issues the Yoon Seok-yeol administration should focus on, 'deregulation' (57.3%) was the top choice. 'Improvement of labor systems such as the minimum wage system' (56.9%) was also significant. Following these were 'resolving global supply chain disruptions' (34.0%), 'support for business transformation' (24.3%), 'expanding support for new technology development and fostering future industries' (24.3%), 'improving workforce supply and demand such as nurturing talent for new industries' (14.1%), and 'support for eco-friendly R&D and activation of carbon neutrality implementation' (6.7%).

Kim Hyun-soo, Director of Economic Policy at the Korea Chamber of Commerce and Industry, emphasized, "Along with short-term measures to alleviate corporate management risks such as support for COVID-19 damage recovery, rising raw material prices, and interest rate hike burdens, efforts to improve the business environment to strengthen the economic fundamentals should be pursued simultaneously."

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