January outlook remains low, fueled by political uncertainty, Trump’s return
| Seoul's financial district in Yeouido (Yonhap) |
Business sentiment among Korean companies has remained negative for 34 consecutive months, marking the longest slump since the business survey index began in January 1975, data showed on Thursday.
According to a survey conducted by the Federation of Korean Industries targeting the nation’s top 600 companies by revenue, the BSI outlook for January 2025 stood at 84.6, far below the baseline of 100.
A BSI reading above 100 indicates optimism for economic conditions compared to the previous month, while a reading below 100 suggests a negative outlook. The index has remained below 100 since April 2022, at 99.1.
The January 2025 BSI also saw a sharp drop from the previous month's reading of 97.3, a decline of 12.7 points. This represents the steepest decline in nearly five years, following the 25.1-point drop recorded in April 2020 during the peak of the COVID-19 pandemic.
The outlooks for the manufacturing and non-manufacturing sectors in January both appear bleak, with their BSI readings at 84.2 and 84.9, respectively.
The manufacturing BSI briefly surpassed 100 in March but has since fallen below the baseline for 10 consecutive months.
The non-manufacturing figure is a dramatic 20.2-point drop from December's outlook of 105.1.
Among manufacturers, only the electronics and telecommunications equipment sector (105.3) reported an optimistic outlook, while pharmaceuticals were neutral.
All other eight sub-sectors, including textiles (53.8), food and beverages (82.4), metals (82.8), equipment (84.2), chemicals (85.2), automobiles (85.3) and furniture (87.5) are expected to experience deteriorating conditions.
For non-manufacturing industries, the transportation and warehousing sector (103.8) was the sole bright spot. Sectors reporting a neutral outlook of 100 include electricity, gas and water supply, as well as leisure, accommodation and food services.
Meanwhile, construction (68.2), technical and business support services (78.6), information and communications (81.3) and wholesale and retail trade (83.3) are among those projecting business to weaken.
FKI noted that year-end and New Year demand in the transportation and warehousing sector could help offset broader pessimism in the non-manufacturing industries.
BSI forecasts across all three key components -- domestic demand (88.6), exports (90.2) and investment (89.4) -- were negative for January, the seventh consecutive month they were down across the board.
Domestic demand sentiment fell to 88, the lowest level since the 88.6 recorded in September 2020, while export sentiment hit a 51-month low of 90.2, tied for the weakest since October 2020. Investment sentiment also marked its lowest level since the 89.4 tallied in April 2023, coming in at 88.6.
The decline across these indicators underscores the persistent challenges facing Korea’s business environment.
Lee Sang-ho, head of the FKI's Economic and Industrial Research Division, pointed out that escalating uncertainties were driven by changes in global economic conditions ahead of the incoming administration of US President-elect Donald Trump, compounded by domestic political instability.
“With increased volatility in the exchange rate and the prolonged slump in domestic demand, immediate efforts are needed to stabilize the currency and restore industrial vitality. Policymakers must also avoid legislative discussions that add to management uncertainties,” he said.
In the meantime, local companies are also postponing investments, considering both domestic and global uncertainties.
According to another survey conducted by the FKI last month, targeting the country’s top 500 companies by revenue, about 56.6 percent of the 122 respondent companies said that they had not yet finalized their investment plans for next year. Another 11.4 percent of the companies answered that they had no investment plans at all.
It represents a stark contrast to last year’s survey, in which a much greater proportion of companies planned to increase investments (28.8 percent) than expected a decrease (10.2 percent).
Companies have identified key risks to their investments, including a global economic slowdown, high exchange rates and inflationary pressures.
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