Businesses see economic recovery after 2-3 years
By Choi Sung-jin
Major Korean businesses think the nation’s economy will be able to recover from the current slump after two to three years, at the earliest, a recent survey showed. And most respondents cited China’s economic slowing as the biggest factor affecting their management this year.
Weighing heaviest on Korean executives’ minds was the possibility of an undue cooling of the Chinese economy, as shown by the stock market crash and currency devaluation in the world’s second-largest economy. Yet despite growing economic uncertainty, including North Korea’s nuclear adventurism, large Korean companies said they would increase new investment and employment.
The Hyundai Research Institute surveyed 79 large manufacturers in the major industries of electronics, automobiles, steel, shipbuilding, petrochemicals, distribution and IT.
Asked which would affect the domestic economy most adversely, the largest number of respondents, 23.1 percent, pointed to China’s economic setback, followed by snowballing household debt (21.7 percent), sluggish private consumption (17.5 percent) and shrinking business investment (14.7 percent). As to reasons for destabilizing the global economy, the respondents also cited the China factor most, with 29.6 percent, chased by U.S. interest rate hikes (21.1 percent) and concerns about emerging economies (18.4 percent).
Nearly 53 percent of firms believe China’s economic growth this year will be slower than last year while fewer than 7 percent replied it would grow faster. Because of the sluggish Chinese economy, 43.4 percent said Korea’s recovery would come “after 2018.” About 70 percent predicted Korea’s growth rate this year would be in the low- or mid-2 percent range while expecting the won-dollar parity rate to remain in the 1,100-1,200 won range. They also forecast international oil prices would remain weak, at $20-30 a barrel.
Almost half of respondents gave D or F grades to the National Assembly, which failed to approve labor reforms and other bills for corporate restructuring last year (not a single business gave the A grade to the parliament). As to the sector that needs reform most urgently, the largest share of 44.6 percent also pointed to political circles.
“Amid the difficult economic environment, domestic businesses’ investments have increased and they are willing to spend more on plant and equipment,” said a researcher at the think tank. “More administrative and financial support and bolder deregulation are needed, particularly for struggling builders and shipbuilders.”