27% of Export Manufacturers Report Worsened Financial Conditions Compared to Last Year

FKI Survey of Top 1,000 Companies by Sales
Only 23.4% Report Improved Financial Conditions
Sluggish Sales and Rising Manufacturing Costs Cited as Main Causes
"Efforts Needed to Reduce Uncertainty and Ease Regulations"

The Federation of Korean Industries (FKI) announced on November 26 that, according to a survey of the top 1,000 export manufacturing companies by sales (with responses from 111 companies), 27.0% of respondents reported that their financial conditions had worsened compared to the previous year.

Meanwhile, 23.4% of companies said their financial conditions had improved, and 49.6% responded that they remained about the same.

Export cars parked at Pyeongtaek Port in Gyeonggi Province. Photo by Yonhap News

The most frequently cited reason for worsening financial conditions was "sluggish sales" (40.0%). This was followed by "rising manufacturing costs, including raw material prices" (23.3%), "increased borrowing costs from financial institutions" (11.1%), and "higher labor and logistics costs" (10.0%).

When asked about the global risk factors with the greatest impact on financial conditions, the top responses were "exchange rate increases" (43.6%), "expansion of protectionism and tariff hikes originating in the United States" (24.9%), "economic slowdowns in major countries such as the United States and China" (15.6%), and "supply chain instability" (9.6%).

The main difficulties in financial management and procurement were "managing risks related to exchange rates and raw materials" (45.4%) and "responding to the deterioration and uncertainty of the export and investment environment" (20.7%). These were followed by "regulations in the capital and financial markets" (13.8%) and "uncertainty in government policies" (10.8%).

As policy priorities to support financial management, respondents cited "minimizing exchange rate volatility" (29.5%), "alleviating uncertainty in exports and investments" (17.1%), "stabilizing raw material supply through supply chain diversification" (16.8%), and "flexible interest rate adjustments" (16.2%).

Regarding the debt ratio, which indicates a company's financial soundness, 20.7% said it had increased compared to the previous year. Meanwhile, 12.6% reported a decrease, and 66.7% said it remained at a similar level to last year.

Companies considered the appropriate base interest rate to be 1.80%, which is lower than the current rate of 2.50%.

Compared to last year, 32.4% of companies reported an increase in demand for funds, while 18.0% reported a decrease. The proportion who said it was similar was 49.6%. The sectors with the highest demand for funds were raw material and component purchases (35.7%), facility investments (30.7%), research and development (15.3%), and employment (9.9%).

Regarding the demand for funds related to the introduction and utilization of artificial intelligence (AI), 18.9% responded "increase," 8.1% said "decrease," and 73.0% said it was "about the same."

Lee Sangho, Head of the Economic and Industrial Division at FKI, stated, "The impact of tariff hikes and persistently high exchange rates, combined with sluggish domestic demand, continue to make it difficult for companies to manage their finances. In addition to efforts to reduce uncertainty both domestically and internationally, bold tax support and regulatory easing are needed to give companies breathing room, while also supporting their ability to invest in the future, including the transition to AI."

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