“Political Uncertainty Causes Companies Distress… Business Sentiment Worst Since COVID-19”

Bank of Korea’s December Business Sentiment Index for All Industries
Corporate Sentiment Worst in 4 Years and 3 Months
Sentiment Worse for SMEs and Domestic Companies, ‘With increasing political uncertainty, corporate sentiment has deteriorated to its worst in 4 years and 3 months. As consumer confidence weakens amidst an impeachment situation, business sentiment is expected to worsen further, particularly in non-manufacturing sectors, next month.’,
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, “According to the ‘December Business Survey Index (BSI) and Economic Sentiment Index (ESI)’ released by the Bank of Korea on the 27th, the composite business sentiment index (CBSI) for all industries this month is 87.0, down 4.5 points from the previous month. This is the lowest since September 2020 (83.0), during the peak of the COVID-19 pandemic, 4 years and 3 months ago.”,
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, ‘CBSI is an economic sentiment indicator derived from key indices of the Business Survey Index (BSI). If it is above 100, it indicates that corporate expectations are more optimistic compared to the past, while below 100 indicates pessimism.’,
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, ‘The CBSI for all industries had declined for three consecutive months from July (95.1) before showing a slight improvement in October after four months. However, with added uncertainty from potential Trump policies and the impeachment proceedings this month, it has declined for two consecutive months since November.’,
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, ‘This month’s corporate sentiment worsened in both manufacturing and non-manufacturing sectors. The manufacturing CBSI for December is 86.9, down 3.7 points from the previous month. Conditions such as business activity and funding served as major contributing factors. By sector, other manufacturing industries, electrical equipment, electronic and visual communication equipment, and metal processing contributed to the deterioration. The overall worsening was influenced by rising exchange rates and slowing consumption and exports.’,
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, ‘In particular, small to medium-sized enterprises (SMEs) and domestic companies experienced a sharper decline in sentiment. The CBSI for large companies in December was 88.2, down 2.7 points from the previous month, and for export companies, it was 91.3, down 1.5 points. In contrast, the CBSI for SMEs (85.3) fell by 5.2 points, and for domestic companies (85.1) it dropped by 5.1 points compared to the previous month.’,
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, ‘The non-manufacturing CBSI for December was 87.1, down 5.0 points from the previous month. Profitability and funding conditions were major factors for the decline. The deterioration was focused in wholesale and retail, arts, sports and leisure related services, and transportation and warehousing sectors. The main reasons were weakened consumer sentiment and reduced domestic and international freight volumes, primarily in cargo transportation.’,
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, ‘Hwang Hee-jin, a team leader at the Bank of Korea’s Economic Statistics Department, stated, “Large corporations and export companies had already reflected in their sentiment last month, but SMEs and domestic companies are more affected by consumer sentiment, thus experiencing a sharper decline.”‘,
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, ‘Many businesses are anticipating both manufacturing and non-manufacturing sectors to worsen further next month. The CBSI outlook for January is projected to be 85.2 for manufacturing, down 3.7 points from the previous month, and 80.3 for non-manufacturing, down 10.0 points. The manufacturing outlook worsened mainly in other manufacturing and electrical equipment, whereas non-manufacturing saw a decline centered around wholesale and retail, and business facilities management, business support, and rental services.’,
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, ‘Hwang explained the reason for the further worsening outlook by stating, “The psychological impact from political issues had the biggest influence. Although some service sectors showed positive sentiment due to budget spending at year-end, this effect will disappear at the beginning of the year, contributing to the worsening outlook.”‘,
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, ‘Regarding the reasons why the non-manufacturing outlook deteriorated more than manufacturing, he noted, “There were many forecasts that the declaration of martial law would negatively impact domestic demand due to weakening consumer sentiment. Specifically, industries like wholesale, retail, and arts, sports, and leisure-related services, closely linked to consumer sentiment, are expected to see worse sentiment.”‘,
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, ‘The ESI for December, which incorporates the Consumer Sentiment Index (CSI) into the BSI, recorded 83.1, down 9.6 points from the previous month. The cyclical variation, after removing seasonal factors, decreased by 1.1 points to 89.7.’,
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, ‘Meanwhile, this survey was conducted from the 11th to the 18th across 3,524 corporate entities nationwide. Responses were received from 3,292 companies, with 1,848 in manufacturing and 1,444 in non-manufacturing sectors.’,
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