May BSI at 87.5... Business Sentiment Chilled for Second Month Amid Middle East Risks

BSI Remains Well Below Baseline for Second Consecutive Month After Middle East Crisis
Financial Conditions BSI (88.0) Hits Lowest Level in 39 Months

The continued rise in uncertainty stemming from the Middle East has led to a deterioration in business sentiment among companies for the second consecutive month.

According to a survey conducted by the Korea Economic Federation (hereafter referred to as the Federation of Korean Industries) on the top 600 companies by sales, the Business Survey Index (BSI) outlook for May 2026 was recorded at 87.5. Following the April outlook, which was the first survey conducted after the Middle East crisis and recorded 85.1, the index has remained in the 80-point range for two consecutive months. Generally, a BSI above the baseline of 100 is interpreted as an optimistic business outlook, while a BSI below 100 is considered pessimistic.

Korea Employers Federation Business Survey Index (BSI) results. Korea Employers Federation

By sector, both manufacturing (86.5) and non-manufacturing (88.4) outlooks fell well below the baseline of 100. This is a similar level to April, when the index entered the 80-point range due to the impact of the Middle East crisis. The manufacturing outlook has remained below the baseline for two consecutive months since March 2026 (105.9), and the non-manufacturing outlook has been below the baseline for five consecutive months since December 2025 (105.2).

Among the 10 sub-sectors within manufacturing, ▲pharmaceuticals (which includes bio and healthcare) recorded 125.0, and ▲electronic and communication equipment (including semiconductors) recorded 118.8, both showing positive performance. Except for ▲wood, furniture, and paper, which was exactly at the baseline of 100, the remaining seven sub-sectors had a predominance of negative outlooks.

Within the seven sub-sectors of non-manufacturing, ▲leisure, accommodation, and food service (123.1), along with ▲wholesale and retail (107.8), which are expected to benefit from the May holiday season, showed positive outlooks. However, the remaining five sub-sectors recorded negative outlooks.

The Federation of Korean Industries interpreted that, as a result of the ongoing conflict in the Middle East, business sentiment has weakened, especially among industries sensitive to oil price shocks (such as those related to energy, raw materials, and logistics) and those that import materials from the Middle East and Africa (such as food and materials).

Korea Employers Federation Business Survey Index (BSI) results. Korea Employers Federation

Across all seven major categories, including domestic demand (90.6), exports (93.2), and investment (92.6), negative outlooks were recorded. In particular, the BSI for financial conditions, which reflects companies' funding capacity and liquidity, fell to 88.0—the lowest level in 39 months since February 2023 (87.9). If the Middle East crisis is prolonged, concerns are mounting that heightened uncertainty about funding needs—such as rising raw material prices—may lead to expanded emergency management, further negatively impacting business sentiment.

Lee Sangho, Head of the Economic Division at the Korea Economic Federation, stated, "As the uncertainty surrounding the Middle East crisis persists, companies continue to experience a decline in business sentiment on the ground. To prevent these external shocks from undermining the competitiveness of our companies, it is essential to support price stability for petroleum products (such as naphtha and liquefied petroleum gas) and to swiftly introduce supplementary measures to minimize disruptions in raw material supply and production."

Meanwhile, the actual BSI for April was surveyed at 83.2. This is the lowest figure in five years and eight months since August 2020 (79.8), during the global COVID-19 pandemic.

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