The Appropriate Exchange Rate Desired by Exporting SMEs is '1262 Won'

Small and medium-sized enterprises (SMEs) that primarily export products and services overseas consider the appropriate exchange rate to be '1262 won.'

The Korea Federation of SMEs announced on the 5th the results of a survey conducted from the 24th to the 29th of last month targeting 304 export SMEs titled 'Survey on the Impact of Exchange Rate Fluctuations on Export SMEs.' They viewed the 'appropriate exchange rate deemed suitable to achieve business goals' as 1262 won per US dollar. The minimum exchange rate to surpass the break-even point was 1195 won, and the expected exchange rate for the second half of the year was 1329 won.

Among SMEs, 48.7% responded that the current exchange rate (1325 won per dollar as of August 24) has a positive impact on corporate profitability. Meanwhile, 26.3% of SMEs reported a significant negative impact.

For companies with export amounts exceeding 10 billion won, 60.9% reported a positive impact, while 17.4% reported a negative impact. For those with export amounts under 1 billion won, only 34.9% responded that there was a positive impact, and 36.5% viewed the impact as negative.

The positive impacts were mainly increased operating profits (89.2%) and strengthened export price competitiveness (12.8%). The increase in operating profit was reported as 0~less than 5% (60.1%), 5~less than 10% (33.8%), 10~less than 15% (4.1%), and over 20% (2%).

Negative impacts included increased costs due to rising raw material prices (73.8%), decreased operating profits (35.0%), requests from clients to lower unit prices (26.3%), and increased logistics costs (20%). The most common decrease in operating profit was 0~less than 5% (56.3%).

Methods SMEs use to manage exchange rate risk included adjusting export unit prices (23.7%), cost reduction (16.4%), adjusting payment dates (6.9%), diversifying raw material import sources (3.6%), subscribing to forward exchange contracts (3.6%), subscribing to exchange rate fluctuation insurance (3.3%), and diversifying payment currencies (1.6%). Nearly half of the companies (49.3%) reported not managing exchange rates at all.

Regarding government measures desired in response to exchange rate fluctuations, companies responded in order: stable exchange rate management (61.5%), export-related financial and guarantee support (22.4%), expanded support for exchange rate fluctuation insurance (12.2%), and expanded support for export diversification (11.8%).

Choo Moon-gap, head of the Economic Policy Division at the Korea Federation of SMEs, said, “In the past, a high exchange rate was interpreted as a positive signal by enhancing the price competitiveness of export SMEs.” He added, “Recently, due to complex reasons such as rising import raw material prices, negative impacts have also increased.” He continued, “Predictable and stable exchange rate management by the government is most important,” and added, “It is also important to reduce uncertainty for export companies by expanding support such as export-related financial guarantees and exchange rate fluctuation insurance.”

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