87% of companies think economy is bad: Survey

Nine out of 10 companies said the economy isn’t showing signs of recovery, according to a survey of 500 companies nationwide, according to the Korea Chamber of Commerce and Industry (KCCI) yesterday.

In the survey of both domestic and external conditions, 87 percent of the companies said they are not feeling any recovery in the economy.

More specifically, 41.5 percent of the companies reported sluggish sales; 28.3 percent reported deteriorating profits; 23 percent said orders were down; and 6.5 percent admitted to a worsening financial situation.

In addition, companies predicted that the economic situation for the entire year will fall short of earlier expectations, with sluggish domestic demand and limp exports.

When asked how the companies rate the economic situation so far this year, the average score was 70.5 points out of 100.

The view fluctuated by industry. The automobile industry received a score of 80.3 points; textiles, apparel and footwear got 80 points; food, beverage and household goods 66.3 points; shipbuilding and industrial plants 76.3 points; steel and metal 74.5 points; and rubber, paper and plastic 70.5 points.

Coming in under the average were machinery (70.3 points), petroleum, chemicals and energy (63.4 points), communication equipment (63.4 points), home electronics (57.3 points), and semiconductors and displays (56.6 points).

The economic outlook for the second half was even less bright. While 51.8 percent of respondents said the economy in the second half will be similar to the first, 26.8 percent said they expected a deterioration while only 21.4 percent expected an improvement.

The most important external factors were, according to respondents, sluggish developed economies (chosen by 32.6 percent), global financial market instability (31.2 percent), an economic slowdown in emerging markets (12.8 percent), oil and commodity price instability (11.6 percent) and the weakening yen (10.0 percent).

Internal factors were sluggish consumption (chosen by 38.2 percent), domestic financial market instability (18.8 percent), poor investments (16.2 percent), increases in household debt (11.4 percent), price instability (10.4 percent) and the continuing downturn in real estate (4.6 percent).

More than half of the companies (53.0 percent) intend to cut costs and improve productivity.

Very few companies said they would combat the floundering economy by entering new markets abroad (8.6 percent) or through mergers and acquisitions or alliances with other companies (1.5 percent).

For a recovery in the economy, companies said the government should stabilize raw material prices (31.8 percent), stabilize foreign exchange rates and financial markets (21.3 percent), increase support for exports (10.2 percent), support job creation (9.7 percent), resolve the household debt problem (9.3 percent), continue to cut taxes (9.1 percent) and do something to help the real estate market (6.8 percent).

“Due to the internal and external factors for economic uncertainties such as sluggish domestic demand, concerns over reduced quantitative easing [in the U.S.] and slowing growth in China, it seems that business conditions in the second half will not be easy,” said Jeon Su-bong, general manager of the research division at KCCI.

BY KIM JUNG-YOON [kjy@joongang.co.kr]