Half of SMEs Suffer from High Exchange Rates... "Appropriate Exchange Rate is 1304 Won"

Korea Federation of SMEs Releases Survey Results on SMEs
Foreign Exchange Losses and Increased Production Costs Most Common
"Government Support Needed, Such as Extension of Loan Maturities"

More than half of domestic small and medium-sized enterprises (SMEs) have suffered damage due to the high exchange rate.

The Korea Federation of SMEs announced the results of the "Survey on the Actual Conditions of SMEs Related to High Exchange Rates" on the 20th. The federation conducted the survey targeting 360 SMEs from the 14th to the 31st of last month.

The average import amount of importing SMEs last year was 5.63 billion KRW. By item, raw materials accounted for the largest share of imports at 59.1%, averaging 3.33 billion KRW.

The average import amount last year for SMEs that import indirectly through domestic companies was 1.99 billion KRW, with raw materials (64.8%) again accounting for the largest share at 1.29 billion KRW.

Regarding the impact of the recent sharp rise in exchange rates, 51.4% of SMEs reported experiencing damage. Only 13.3% of SMEs responded that they benefited from the high exchange rate.

The proportion of companies reporting damage was highest among import-only companies (82.8%), followed by companies engaged in both import and export (62.1%), domestic companies not involved in import or export (48.4%), and export-only companies (26.2%).

In the survey on types of damage (multiple responses allowed), the most common responses were "foreign exchange losses" and "increased production costs due to high exchange rates," each at 51.4%. This was followed by "decreased price competitiveness due to increased import costs" (49.2%) and "non-reflection of exchange rate increases in delivery prices" (40.0%).

Regarding the increase in import costs due to the exchange rate rise, 70.3% of SMEs responded that the amount was "less than 100 million KRW."

As for government support measures needed to respond to the exchange rate increase, "extension of loan maturities and interest rate reductions" was the highest at 42.8%, followed by "expansion of logistics support such as freight and shipping space" (26.7%) and "support for exchange rate fluctuation insurance and trade guarantees" (26.1%).

At the time of the survey, the breakeven exchange rate at which companies begin to see operating losses was on average 1,334.6 KRW per US dollar, and the appropriate exchange rate for companies to achieve their target operating profit was surveyed at an average of 1,304 KRW.

Kim Cheol-woo, Director of Trade Policy at the Korea Federation of SMEs, stated, "As the won-dollar exchange rate remains at the 1,400 KRW level recently, damage to exporting and importing SMEs is increasing," adding, "Active government policy responses are necessary to stabilize the exchange rate."

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