Severe Economic Cold Wave... February BSI Forecast Hits Lowest in 30 Months

FKI Conducts BSI Survey on 600 Major Companies
Manufacturing and Non-Manufacturing Both Sluggish for 9 Consecutive Months
Domestic and Export Markets Both Sluggish for 8 Consecutive Months
"Need to Enhance Corporate Vitality through Expanded Facility Investment Tax Credits"

[Asia Economy Reporter Han Yeju] The Business Survey Index (BSI) for next month is expected to record its lowest level in 2 years and 6 months.

The Federation of Korean Industries (FKI) announced on the 26th that the February BSI forecast, based on a survey of the top 600 companies by sales, recorded 83.1. This is the lowest level in 2 years and 6 months (30 months) since August 2020 (81.6).

The BSI forecast has been below the baseline of 100 for 11 consecutive months since April last year (99.1). The actual BSI for January this year recorded 84.2, showing poor performance for 12 consecutive months from February (91.5), indicating a prolonged deterioration in corporate performance.

Comprehensive Business Survey Index (BSI) Trends. [Data provided by the Federation of Korean Industries]

By industry, the February BSI showed simultaneous sluggishness with both manufacturing (81.4) and non-manufacturing (85.1) sectors falling below the baseline of 100 for 9 consecutive months since June 2022. In manufacturing, no sub-industry exceeded the baseline, and sectors including the country’s top three export items (electronics & telecommunications, petroleum refining & chemicals, automobiles & other transportation) showed poor performance for 5 consecutive months since October 2022.

The five-month consecutive poor outlook for the three major export-driven industries is the first in 2 years and 8 months since June 2020, when COVID-19 was at its peak. The FKI expressed concern that if the export slump in these key industries continues, the depth of the domestic economic recession will deepen further.

Among non-manufacturing sub-industries, only electricity, gas, and water supply (100.0) recorded above the baseline, while information and communications (75.0) showed the largest decline compared to the previous month (down 30.9 points) due to the global IT industry downturn, making it the most sluggish sector.

The February BSI by survey sector showed negative outlooks across all sectors (▲financial conditions 87.9 ▲investment 89.0 ▲profitability 89.5 ▲domestic demand 89.5 ▲exports 90.9 ▲employment 96.0 ▲inventory 105.4), marking 5 consecutive months of poor performance in all sectors since October 2022. In particular, domestic demand (89.5) and exports (90.9) have shown negative outlooks for 8 consecutive months since July 2022.

The February manufacturing inventory BSI recorded 110.1, the highest in 2 years and 7 months (31 months) since July 2020 (112.9). The inventory expansion outlook is due to the simultaneous slump in exports and domestic demand, which has intensified poor sales for companies. The FKI expressed concern that if inventory levels continue to rise, it could negatively impact new investments and employment.

Choo Kwang-ho, head of the FKI Economic Headquarters, stated, "Corporate sentiment is significantly shrinking due to the recent intensification of economic uncertainty," and urged, "To boost investment sentiment, the government should promptly legislate the expansion of the facility investment tax credit rate it is currently promoting, while focusing more on improving the business environment through deregulation and labor market flexibility."

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