Daejeon and Chungnam Manufacturing Industry, Economic Outlook for Q1 This Year 'Cloudy'

[Asia Economy (Daejeon) Reporter Jeong Il-woong] The manufacturing industry in the Daejeon and Chungnam regions is expected to have a "cloudy" economic outlook for the first quarter of this year.

According to the Daejeon Chamber of Commerce and Industry on the 10th, in the recent survey of the "2023 1st Quarter Business Survey Index (hereafter BSI Index)," manufacturing companies in the Daejeon and Chungnam regions recorded a BSI index of 71, which is lower than the national average BSI of 74.

The BSI index for the first quarter of this year is 13 points lower than the fourth quarter of last year (84).

In particular, the index of manufacturing companies within the jurisdiction of the Daejeon Chamber of Commerce has been below the baseline (100) for three consecutive quarters since the second quarter of last year (101), indicating that difficulties in business management continue.

The difficulties faced by the manufacturing industry are mainly attributed to the impact of exchange rate and price instability caused by the global economic contraction due to the US interest rate hikes, high-intensity monetary tightening in major countries, and economic slowdown in China, according to the Daejeon Chamber of Commerce.

In fact, when asked about sales performance compared to targets set at the beginning of last year, 59% of responding companies said they did not achieve their targets, and 69.1% of respondents said their operating profits were "below expectations."

Regarding the factors that had the greatest impact on last year's sales performance and operating profits, 32.1% of responding companies cited "raw material prices."

Above all, regarding the manufacturing companies' outlook on Korea's economic growth rate this year, 92.9% of all respondents expected it to be lower than the forecasts of major domestic and international institutions (1.5% to 2.5%).

As risk factors threatening the domestic economy this year (multiple responses allowed), the following were cited: ▲ continued high prices and raw material costs (61.2%), ▲ continued high interest rates (37.6%), ▲ domestic demand recession (31.8%), ▲ prolonged high exchange rates (23.5%), ▲ prolonged export slowdown (20.0%), and ▲ instability in supply of raw and subsidiary materials (16.5%).

To manage economic risk factors, the government’s priority tasks were identified as "interest rate policy for economic stimulus (47.1%)," "stabilization of foreign exchange markets such as exchange rates (40.0%)," "easing of credit market tightening (30.6%)," "securing growth engines through regulatory innovation (22.4%)," and "stabilization of supply chains (20.0%)."

A representative from the Daejeon Chamber of Commerce said, "There are concerns that the management difficulties of local companies will intensify due to external factors such as steep interest rate hikes, increased external economic volatility, and rising raw material prices," adding, "It is urgent to prepare government support measures to resolve companies' financial problems and alleviate liquidity pressures."

Meanwhile, the BSI index quantifies the business sentiment of companies. A BSI index of 100 or higher means that "more companies view this quarter's economy more positively than the previous quarter," while below 100 means the opposite.

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