Next Year's Business Environment Also Cloudy... 6 Out of 10 Small and Medium Enterprises Opt for 'Cost Reduction and Tightening'

Korea Federation of SMEs Announces Results of 'Management Status and Plan Survey'
"Need for Policy to Alleviate Financial Cost Burden" Reaches 68.8%
"Need to Prepare for Mid- to Long-Term Labor Population Decline" 45.6%

[Asia Economy Reporter Kim Bo-kyung] More than half of small and medium-sized enterprises (SMEs) evaluated this year's business environment as difficult. The situation next year is also expected to be challenging. Six out of ten SMEs identified cost reduction and tightening as their core management strategies for next year.

The Korea Federation of SMEs announced the results of the "2022 SME Management Status and Next Year's Management Plan Survey," conducted on 410 SMEs, on the 11th.

More than half (53.2%) of all responding companies evaluated this year's business environment as "difficult," while 35.4% responded "average," and 11.6% said it was "not difficult."

The main factors that made management difficult were "demand contraction (57.3%)" followed by "interest rate hikes (42.7%)" and "rising labor costs (28.4%)."

As self-help efforts to improve the business environment this year, the highest proportion (59.8%) responded with "cost reduction and restructuring." This was followed by "expansion of business partners (sales and promotion) (51.5%)" and "expansion of financing sources (26.8%)."

Minister Lee Young of the Ministry of SMEs and Startups is delivering a greeting at the Labor Regulation Improvement Grand Debate held on the 5th at the Korea Federation of SMEs in Yeouido, Yeongdeungpo-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

Regarding the 2023 business environment, 61.5% of responding companies expected it to be similar to this year, forecasting that the business environment will remain challenging next year. Companies expecting deterioration accounted for 26.3%, while those expecting improvement were 12.2%.

When asked about the core management strategies for 2023 among all responding companies, the most common answer was "cost reduction and tightening (61.2%)," followed by "strengthening financial risk management (34.9%)" and "expanding new sales channels (31.5%)."

By industry, the response rate for "cost reduction and tightening" was somewhat higher in manufacturing at 76.5% compared to non-manufacturing at 46.7%.

For the stabilization and growth of SMEs in 2023, the policy most needed was "alleviation of financial cost burdens (68.8%, multiple responses allowed)." This was followed by "expansion of sales channels and export support (33.2%)" and "regulatory improvement (32.7%)."

In the mid to long term, the factor most unfavorable to SME management requiring preparation was "declining labor population" at 45.6%, followed by "regulations lagging behind industrial changes (33.2%)" and "widening gap with advanced technology levels (10.5%)."

Choo Moon-gap, Head of Economic Policy at the Korea Federation of SMEs, stated, "The complex economic crisis is expected to continue next year," adding, "Since alleviating the financial cost burden was identified as the government's top priority policy for SME stabilization and growth next year, we hope that measures such as converting to low-interest loans and smooth debt restructuring will be prepared."

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