Manufacturers in Changwon Region Face Biggest Risks This Year: High Interest Rates and Rising Raw Material Prices

Changwon Chamber of Commerce and Industry, 2023 Economic Outlook and Domestic and External Risks Survey from the Perspective of Companies

Changwon Chamber of Commerce and Industry, Gyeongnam.

[Asia Economy Yeongnam Reporting Headquarters, Reporter Song Jong-gu] The Changwon Chamber of Commerce and Industry in Gyeongnam conducted a survey titled ‘2023 South Korea Economic Outlook and Domestic and International Risk Survey’ targeting 154 manufacturing companies in the Changwon area.

First, when asked about the expected economic growth rate for 2023 from the perspective of companies, 70.8% of the respondents answered that growth would be ‘below 1.5%’. This is lower than the Ministry of Economy and Finance’s forecast of 1.6% (as of December 21, 2022). Next, 22.7% answered ‘1.5% or higher but below 2.0%’, and only 6.4% responded with ‘2.0% or higher’.

This forecast shows a significant difference compared to the results of the survey conducted at the end of the third quarter last year. At that time, the proportion of respondents expecting South Korea’s economic growth rate in 2023 to be ‘below 1.5%’ was about 31.3%, but in this survey, it increased by 39.5 percentage points to 70.8%. Moreover, in the third quarter survey, the proportion expecting ‘2.0% or higher’ was 36.1%, but in the fourth quarter, it dropped by 29.7 percentage points to 6.4%.

This suggests that the economic conditions perceived at present have worsened compared to the third quarter survey.

Amid the dominant outlook that the 2023 economic growth rate will be low, when asked about investment plans compared to 2022, 41.9% of respondents answered that investment would ‘decrease compared to last year’, 34.9% said it would be ‘at the same level as last year’, and only 23.3% said it would ‘increase compared to last year’.

Regarding domestic and international risk factors threatening South Korea’s economy in 2023, 30.7% cited ‘continued high prices of raw materials and commodities’ as the most significant. This was followed by ‘continued high interest rates’ at 15.8%, ‘domestic demand recession’ at 15.2%, ‘instability in supply of raw and subsidiary materials’ at 14.0%, ‘prolonged export slowdown’ at 8.8%, ‘prolonged high exchange rates’ at 6.1%, and ‘geopolitical risks (such as the Ukraine war)’ at 4.7%.

When asked about the government’s priority tasks for managing economic risks, responses were ‘stabilization of foreign exchange markets including exchange rates’ at 24.4%, ‘interest rate policies to stimulate the economy’ at 22.2%, ‘easing credit market tightening’ at 16.8%, ‘support for exports and corporate activities’ at 10.8%, ‘stabilization of supply chains’ at 10.5%, ‘securing growth engines through regulatory innovation’ at 10.5%, and ‘economic diplomacy to mitigate geopolitical risks’ at 4.4%. By company size and type, small and medium-sized enterprises and domestic market-oriented companies showed relatively higher responses for ‘interest rate policies to stimulate the economy’, while large and medium-sized enterprises showed relatively higher responses for ‘securing growth engines through regulatory innovation’.

Amid identifying stabilization of foreign exchange markets including exchange rates as a government priority in the economic sector, the average exchange rate level used as a basis for establishing business plans in 2023 was surveyed at ‘1275.50’.

A representative from the Changwon Chamber of Commerce and Industry said, “With the high prices, high exchange rates, and high interest rates that began in earnest last year expected to continue this year, along with forecasts that domestic and international demand will also decline significantly, the economic outlook for companies in the Changwon area, which are closely affected by external economic conditions, is also negative. Therefore, government-led preemptive measures to stabilize exchange rates and interest rates must be implemented.”

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