Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Firms feel bigger shocks from COVID-19 than 1997 crisis
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By Baek Byung-yeul
By Baek Byung-yeul
Korean companies fear the COVID-19 pandemic will hit the global economy harder than the 1997-98 Asian financial crisis, estimating their 2020 sales will drop more than 20 percent year-on-year, according to a business lobby here, Sunday.
In its survey of 223 companies that have suffered losses from the coronavirus pandemic, the Korea Enterprises Federation (KEF), a business lobby comprised of some 4,300 companies here, said 42.3 percent responded that COVID-19 would have a bigger impact on the economy than the financial crisis that swept through many Asian countries in the late 1990s.
The KEF said the worse-than-expected responses to the survey showed many companies are facing unprecedented uncertainty sparked by the pandemic.
“Given the first-quarter economic growth rate and other economic indicators are not worse than the 1997-98 financial crisis, many companies predicted the economic impact would be more dangerous than during the so-called IMF crisis. This reflects anxiety among companies,” the KEF said.
More than half the companies in the survey predicted a negative outlook for 2020, with 72.4 percent saying their sales would fall 20 percent year-on-year and 70.6 percent replying that their operating profits would also be reduced by more than 20 percent year-on-year.
A total of 40.3 percent of the respondents said it would take more than a year for the economy to recover fully, while 31.8 percent said it would take between six months and a year.
In its latest report, Woori Finance Research Institute expects operating profit for non-financial firms in the April-June period will drop by 39.8 percent year-on-year.
“The first-quarter sales and operating profits of non-financial firms here are estimated to be down by 1.5 percent and 35 percent year-on-year, respectively,” the institute said in the report.
“Lockdown policies and plunging oil prices will lead the fall in global demand,” it said. “Every industrial sector will suffer a fall in sales except utilities, healthcare and consumer staples such as foods and drinks.”