By Choi Kyong-ae
Nine out of 10 Korean companies do not expect to achieve their sales targets this year, a survey showed Wednesday.
They were also negative about the outlook for exports next year.
From Oct. 21 to Nov. 11, the Federation of Korean Industries (FKI) sent questionnaires to the top 600 companies in terms of sales, and 285 of them responded. The survey asked them about their business environment, earnings forecasts and outlook for the nation’s growth, an FKI official said.
“Fifty-three percent of the respondents said they were not likely to achieve their annual sales targets due to sluggish domestic demand and declining exports,” the official said.
Three out of 10 respondents said it would be impossible for exports in 2016 to go back to the export level of 2014, as Korean companies were facing tougher competition from Chinese and Japanese rivals in their major markets.
Korea’s exports fell 7.6 percent year-on-year to $440 billion as of Nov. 16, according to the Bank of Korea (BOK).
Compared to the Japanese yen and the Chinese yuan, the Korean won’s relative strength against the U.S. dollar continues to weigh on the bottom line of Korean firms when their dollar-denominated earnings are repatriated into won.
Most of the respondents picked China’s slowing economy, a possible U.S. rate increase in December and unfriendly foreign exchange rates as major threats to their performance next year.
“To weather those challenges, companies are shifting their focus from expansion and R&D investment to restructuring,” the official said.
Nearly two out of 10 respondents said they planned to sell non-core assets, reduce their workforce and put a bigger focus on mainstay businesses.
Companies asked the government to pass a bill as soon as possible designed to help financially struggling companies take preemptive steps to avoid going bankrupt. They also demanded labor reforms such as the full adoption of a peak wage system across all industries. In this system, pay is reduced for workers from age 55 to open up jobs for younger people.
Looking forward, more than 90 percent of respondents predicted Korea’s economy will grow by less than 3 percent next year. Last year, it grew 3.3 percent.
In October, the BOK cut its outlook to 2.7 percent for this year from its July forecast of 2.8 percent due to growing external downside risks. The central bank and the finance ministry expect the economy to grow 3.2 percent and 3.5 percent, respectively, in 2016.