Busan Chamber of Commerce Surveys Local Companies on Base Rate Cut... Call for Bold Action Beyond 'Big Cut' Level

63.5% of Local Companies Expect Base Rate Cut in Second Half, Anticipate Reduction of Over 1.0%p

Base Rate Cut Raises Hopes for Improved Corporate Performance Through Lower Interest Expenses

As high interest rates and worsening funding conditions continue to increase the burden on companies, local businesses are now expecting more aggressive base rate cuts?beyond the recent "big cut" (0.5%P reduction) implemented by the US Federal Reserve?to boost corporate vitality in the second half of the year.

The Busan Chamber of Commerce and Industry (Chairman Yang Jaesaeng) announced on the 24th the results of a survey conducted to gauge the level of burden caused by prolonged high interest rates and opinions on base rate cuts in the second half of the year. A total of 74 major companies in the Busan area participated in the survey.

According to the survey results, 63.5% of respondent companies predicted that the base rate would be lowered in the second half. This is analyzed to be due to the increasing necessity for a rate cut, considering the prolonged high interest rate environment, the shift in US monetary policy following the Fed's big cut, and the overall domestic economic situation.

Regarding the level of domestic base rate cut expected within this year, 44.7% of companies hoped for a strong adjustment of 1.0%P or more.

Meanwhile, 41.9% of companies preferred a cut in the range of "0.5%P to 1.0%P," which is the provisional level suggested by the US Federal Reserve after its recent big cut. Only 13.5% favored a minor adjustment of less than 0.5%P, the lowest response rate. This reflects the funding difficulties faced by companies and their high expectations for an aggressive base rate cut to alleviate the burden of high interest rates.

Expected level of base interest rate cut.

Regarding the positive impact expected from a base rate cut, 64.9% cited improved performance due to reduced interest expenses as the most significant benefit. Currently, local companies are subject to annual interest rates that combine the base rate (3.5%) with an additional margin of over 4%, making interest expenses a major factor in reducing net profit. As such, the greatest expectation is that lower interest costs will lead to improved corporate performance.

Other anticipated effects included increased facility investment (17.6%), improved financial structure through debt repayment (9.5%), and expanded research and development (4.1%). As borrowing conditions ease, it is highly likely that various facility and R&D investments delayed by high interest rates will resume.

When asked about necessary policies to ensure that a base rate cut translates into increased corporate vitality, 45.9% cited the need for measures to stimulate investment as the highest priority, followed by boosting domestic consumption (31.1%), deregulation for businesses (16.2%), and support for developing overseas markets (2.7%).

A Busan Chamber of Commerce and Industry official stated, "Currently, local companies are struggling with high interest rates and sluggish domestic demand, making business operations difficult. Even when profits are generated, high interest expenses are eroding profitability," adding, "Since a base rate cut is directly linked to improved corporate performance, policy support to stimulate corporate vitality and new investments should be implemented alongside rate reductions to maximize their effect."

Busan Chamber of Commerce and Industry

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