Manufacturers are starting to feel optimistic

Confidence among manufacturers hit a 27-month high as vaccinations promise to bring the world out of the Covid catastrophe.

The Business Survey Index (BSI) for the second quarter hit 99, according to the Korea Chamber of Commerce and Industry (KCCI) on Sunday, up around 30 percent from the previous quarter's 75.

A figure above 100 indicates more companies expect the economy to improve in the next quarter compared to the previous quarter, while a figure below 100 indicates the opposite.

The KCCI surveyed 2,200 manufacturers nationwide from Feb. 22 through March 5.

The second quarter BSI was the highest since 103 for the third quarter of 2014.

“Expectations of economic recovery have increased as on-year exports jumped 11.1 percent from December through February from large-scale stimulus packages in key countries and global vaccinations,” said the KCCI in a statement. “On top of that, the start of widespread vaccinations in Korea is seen to have raised expectations for the domestic economy to recover.”

The second quarter BSI for exports was 109, up 33 percent from the previous quarter’s 82, while the BSI for the domestic economy was also up 33 percent to 97.

Expectations for exports in the second quarter were particularly high for cosmetics, IT devices and machinery – all registering above 100 - while expectations for shipbuilding and petrochemicals were below 100.

The KCCI said major shipbuilders have recently benefitted from orders poured in, but mid-and-small-sized shipbuilders continue to suffer from a dearth of orders.

Respondents to the survey indicated that exchange rate volatility, rises in oil prices, and protectionism prompted by U.S.-China trade disputes are major factors that could hurt business this year.

A resurgence of Covid-19, stricter regulations on companies and sudden rises in domestic interest rates were potential risks to the domestic economy.

Also, more than 80 percent of survey respondents said they believed economic polarization had been aggravated by Covid-19, while only 0.9 percent said that polarization had improved.

More than 70 percent believed digitization has sped up due to the pandemic.

“Though expectations for economic recovery by companies have started to rebound, internal and external risks aren’t negligible,” said Kim Mun-tae, a spokesperson for KCCI. Kim added that the Korean government should take preemptive measures in case raw materials prices rise or the U.S. central bank raises interest rates. Kim also noted the need for the Korean public's cooperation in getting vaccinated against Covid-19.

BY JIN MIN-JI [jin.minji@joongang.co.kr]