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Biz Sentiment Falls to 10-Year Low

Posted November. 27, 2008 03:09,   


Business sentiment among domestic manufacturers has hit a new low since the third quarter of 1998.

The Bank of Korea announced the results of a survey of 2,150 domestic manufacturers yesterday and said the business survey index this month decreased 13 points from October to 54, setting a new low since 47 in the third quarter of 1998.

An index below 100 means the number of companies with a negative outlook for the economy is larger than those with positive views, and vice versa.

The index forecast for corporate performance in December was 52, falling 13 points from this month.

Uncertain economic conditions were cited as the biggest reason for the sluggish outlook (24.3 percent); followed by the weakening won (21.3 percent); sluggish domestic demand (17.4 percent); surging raw material prices (9.4 percent); declining exports (9.4 percent); and lack of capital (8.1 percent).

Business sentiment is unlikely to improve next year. In the survey of 1,564 manufacturers conducted by the Korea Chamber of Commerce & Industry, the index for the first quarter of next year plummeted 24 points from 79 in this year`s fourth quarter, falling below 61 recorded in the third quarter of 1998 when business sentiment nosedived after the foreign currency crisis.

By corporate size, the index forecast for large corporations was almost halved from 92 to 49 over the same period. Similarly, that for small and medium-size enterprises tumbled from 78 to 56.

The index for large corporations showed a 43-point fall as opposed to the 22-point drop for smaller companies. This shows large corporations, which had long maintained a positive forecast for the economy, now believe economic conditions will worsen in the first quarter of next year.

parky@donga.com abc@donga.com