Domestic manufacturers will recover somewhat in the second quarter of this year, but industries such as oil refining, petrochemicals, automobiles, and parts, which are heavily affected by rising raw material prices, are still expected to be bad.
The Korea Chamber of Commerce and Industry (KCCI) announced on the 27th that it recently surveyed 2,166 manufacturers nationwide on the economic outlook index (BSI) for the second quarter of 2022, up 7 points from the first quarter (89).
BSI fell from 103 in the third quarter of last year to 91 in the fourth quarter of last year and continued to decline until the first quarter of this year, but this time it reversed its upward trend. However, the negative outlook was still dominant at less than 100.
If the BSI is more than 100, it means that many companies see the quarter’s economy more positively than in the previous quarter, and if it is less than 100, it is the opposite.
An official from the Korea Chamber of Commerce and Industry analyzed, “The BSI rebounded due to continued export growth and eased quarantine regulations and expectations for the launch of a new government, but risk factors such as prolonged Russia-Ukraine war and rising oil and raw material prices remain.”
BSI trends in the Korea Chamber of Commerce and Industry
BSI trends in photo description
By industry, prospects for cosmetics 123, electrical equipment 110, medical precision 107, pharmaceutical 103, machinery 101, and IT and home appliances exceeded the standard.
On the other hand, non-metallic minerals (85), refineries and petrochemicals (91), automobiles and parts (93), steel (98), food and beverage (96), and shipbuilding and parts (99), which suffer from labor shortages, were widely expected.
The most worrisome thing for companies in the second quarter was the “price of raw materials.” 82.5% of respondents (multiple responses) cited “increasing production costs due to rising raw material prices” as a threat factor.
BSI by industry in Q2 2022
Photo description BSI by industry in Q22022
It was followed by “domestic stagnation due to the aftermath of COVID-19” (51.4%), “increasing interest costs due to interest rate hikes (33.0%), “production disruptions due to global supply chain problems” (28.1%) and “implementation of corporate burden bills such as the Severe Disaster Punishment Act” (24.1%).
68.5% of respondents to companies that have “decreased profits or turned into deficits” due to inflation said “reducing costs such as manpower and expenses” and 47.3% said “reflecting increases in prices.”
57.3% of the respondents cited “deregulation” and 56.9% cited “improvement of the labor system such as the minimum wage system” as questions about economic issues that the next government should focus on.
The results of this survey show that the business sentiment is at a crossroads, said Kim Hyun-soo, head of the Korea Chamber of Commerce and Industry’s economic policy office. “We need to support COVID-19 damage compensation, raise raw materials, and ease short-term corporate management risks.”