Gwangyang Chamber of Commerce, Gwangyang Region Q4 Business Outlook Index at 82.7

Economic Growth Rate Forecast for This Year 2.0~2.5%, 69.3%

Missed This Year's Performance (Operating Profit) Target 40.4%

[Asia Economy Honam Reporting Headquarters, Reporter Heo Seon-sik] The Gwangyang Chamber of Commerce and Industry in Jeonnam (Chairman Lee Baek-gu) announced that the ‘2022 4th Quarter Business Outlook Survey,’ conducted from August 24 to September 7 (10 business days excluding holidays) targeting about 100 local companies, showed a Business Survey Index (BSI) of 82.7.

This is an increase (34.2↑) compared to the 3rd quarter (48.5), but due to the base effect, the 4th quarter is still expected to be difficult.

The Business Survey Index (BSI) quantifies the on-site business sentiment of companies and is expressed on a scale from 0 to 200. A value above 100 indicates that more companies expect the business conditions to improve compared to the previous quarter, while a value below 100 means more companies expect deterioration.

Regarding the 2022 economic growth rate forecast, 21.2% responded with 1.5%, 38.5% with 2.0%, 30.8% with 2.5%, and 9.6% with 3.0%. This is similar to the government’s forecast of 2.6%.

Meanwhile, the OECD forecast is 2.7%, and the IMF forecast is 2.3%.

For next year’s business outlook, 65.5% of companies predicted ‘worsening,’ while 34.5% expected ‘improvement.’ The main reason cited for ‘worsening’ was a decrease in sales due to reduced volume and price drops (47.4%), whereas the main reason for ‘improvement’ was an increase in orders (60.0%), showing differences depending on the industry.

Regarding this year’s performance (operating profit) against the targets set at the beginning of the year, 57.7% answered that they achieved or were close to the target, 40.4% fell short of the target, and 1.9% exceeded the target.

The domestic and international risks expected to affect this year’s performance were ‘rising costs and instability in raw material supply’ (30.5%), followed by ‘interest rate hike trend’ (21.2%), ‘increased volatility in external economic indicators such as exchange rates’ (16.9%), ‘private consumption contraction due to inflation’ (8.5%), ‘supply chain risks such as US-China conflicts’ (6.8%), ‘policy risks such as corporate burden bills’ and ‘difficulty in financing due to loan maturity’ (each 5.1%), ‘export sluggishness due to economic slowdown in major countries’ (4.2%), and ‘labor shortages and others’ (1.7%).

When asked about financing methods, ‘borrowing from banks and securities firms’ (48.4%) and ‘internal reserves’ (29.5%) accounted for the largest shares, followed by ‘government subsidies’ (13.7%), ‘issuance of stocks and bonds’ (6.3%), and ‘others’ (2.2%).

Compared to before COVID-19, the financing methods that increased in proportion were mainly ‘borrowing from banks and securities firms’ (61.0%) and ‘internal reserves’ (22.0%), with ‘government subsidies’ (11.9%), ‘issuance of stocks and bonds’ (1.7%), and others (3.4%) showing little difference.

The most important purpose for financing was ‘fixed costs such as rent and labor costs’ (61.3%), followed by ‘facility investment and business expansion’ (26.9%), and ‘debt repayment and asset investment’ (each 5.8%).

Regarding the current financial condition, ‘normal’ (44.2%) and ‘difficult’ (36.5%) coexisted, with ‘good’ at 13.5%, ‘very difficult’ at 3.8%, and ‘very good’ at 1.9%.

The reasons for financial difficulties were ‘cash flow restrictions due to sluggish sales’ (40.6%), followed by ‘lack of reserves due to rising production costs’ (34.4%), ‘excessive burden of loan repayments and interest’ (15.6%), ‘loan limit exceeded compared to held assets’ (6.3%), and ‘loan delinquency and credit rating downgrade’ (3.1%).

The main risk factors in fund management were primarily ‘rising loan interest rates due to base rate hikes’ (57.1%), followed by ‘increased burden of foreign currency borrowing due to exchange rate rise’ and ‘reduction of policy funds’ (each 11.4%), ‘regulations related to financial loans and financing’ (8.6%), ‘end of principal and interest repayment deferral measures’ (4.3%), and ‘others such as sluggish sales and exchange rate rise’ (7.1%).

A representative from the Gwangyang Chamber of Commerce and Industry said, “In the midst of the COVID-19 pandemic, with interest rate cuts and expansionary fiscal policies causing inflation, countries around the world are competitively raising policy interest rates and shifting to a tightening stance.” He added, “At the Jackson Hole meeting in Wyoming, USA, on the 26th (local time), US Federal Reserve Chair Powell said that the central bank will continue to raise rates in a way that causes some pain to the US economy, increasing the possibility of an additional giant step (0.75 percentage point hike).”

Asia Economy Honam Reporting Headquarters, Reporter Heo Seon-sik hss79@asiae.co.kr

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