Nearly half of Korean firms plan no domestic investment next year

Rising gloom over the business environment due to a financial market crunch and weak Korean won has led to nearly half of Korea's firms having no plans for domestic investment next year.

The Federation of Korean Industries (FKI), announcing the results of a survey it commissioned to the Seoul-based polling agency Mono Research from Nov. 17-25 on the nation's top 500 companies in sales on domestic investment next year, said 48% of the 100 respondents said they had no such plans and 38% having yet to make them.

A financial market crunch and problematic financing were cited as the biggest reason for not raising investment in Korea with 28.6%, followed by the depreciating Korean won with 18.6% and decline of the domestic market 17.6%.

Among the 52% who do plan domestic investment next year, 67.3% said their scale will be like this year’s, with 19.2% expecting lower and 13.5% higher expansion, suggesting overall sluggish prospects for next year's investment.

Companies planning to raise investment cited as their main reasons securing a vision for their future with 52.4%, growing competition in their sector 19% and boosting competitiveness through active investment during a recession 14.3%.

On when domestic investment will rebound, 64% said after the second half of next year, with 29% saying that, 24% the first half of 2024 and 11% that year's second half. Those saying "no commitment" accounted for 26%.

The survey also said the two major hindrances to investment next year were the global economic slowdown with 29.1% and continued weakness of the Korean won with 21.3%. Other negative factors mentioned were high inflation with 15.3%, persistence of global economic tightening and rising interest rates 15.3%, and excessive private debt and financial market insolvencies 9.7%.

On measures are needed to stimulate domestic investment, 24.6% of the companies said adjustment of the speed of interest rate hikes, 22% stimulation of the financing market, 14.7% deregulation, and 13.7% stronger corporate tax cuts and related support.

Write to Sang-Eun Lee at selee@hankyung.com