Top companies expect economy will get worse

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Top companies expect economy will get worse

More than 80 percent of the nation’s top 30 conglomerates expect that the economy will not recover from its current slump before the end of 2016.

The Federation of Korean Industries (FKI) said Wednesday it conducted a survey of the country’s largest business groups - including Samsung, SK, Hyundai Motor Group and LG - to study their investment and management plans for this year.

Of the 29 companies that responded, 24 said they suspect that the economy is in a long-term slump, while five said the recession will be temporary.

Seventeen companies said they are considering restructuring to make it through the recession and that their investments this year will either shrink or stay at a similar level to last year.

In the poll, 24 companies said it will take a year or two for the economy to recover. Half responded that the economy will start to pick up again in 2016, and half said the economy will not improve until 2017. Only four companies expect the economy to turn around this year.

The FKI poll also showed that five companies think the country’s current business environment and market conditions are similar to those just before the 2008 global financial crisis and 16 companies said the situation is worse.

They cited tough global competition as their biggest challenge. Lesser challenges included the declining domestic market, worsening profitability, lack of capital, rising production costs and export difficulties.

To overcome the difficult conditions, most of the conglomerates said they will be cautious with their budgets this year. While 17 of the 29 companies said they will restructure to reduce costs and focus on their high-profit businesses, only eight companies said they will increase investments, for instance, in R&D facilities. Only two groups said they would try to expand their market share.

Of the respondents, 58 percent said they will not increase investment until the economy recovers. The falling price of oil and cost of raw materials (20 percent), security of funds (13 percent) and weakening yen (6.9 percent) were other factors that could change investment plans this year.

“The country needs to take this poll seriously because most top conglomerates leading the country’s economy currently feel that they are in a similar economic slump to the 2008 global financial crisis,” said Song Won-keun, a spokesman for the FKI.

BY KWON SANG-SOO [sakwon80@joongang.co.kr]

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