S.Korean companies expect exports to decline in 1% range this year

South Korea's companies expect both sales and exports this year to decline in the 1% range from last year, predicting economic growth in the low 1% range for the year, lower than the projections of domestic and foreign institutions.

The Korea Chamber of Commerce and Industry (KCCI) on Tuesday said this in a report on this year's economic and business prospects from a corporate perspective based on a survey of 2,254 manufacturers.

The respondents predicted that sales will decline 1% and exports 1.3% this year, with 34.5% predicting a fall in sales and 26.2% a drop in exports. Just 32.4% expected turnover to increase and 30.6% projected export growth.

Their forecast for economic growth this year was 1.16%, with 30.6% saying 1%-1.5%, 28.8% 1.5%-2% and 15.4% 0.5%-1%. In addition, 8.8% predicted that the economy will shrink and just 0.4% expected growth of 3% or more.

Thus businesses seem more pessimistic over economic growth than the Ministry of Economy and Finance, which expects 1.6%, and the Bank of Korea, which forecasts 1.7%.

A KCCI source said, "The economic conditions felt at business sites have not improved," adding, "This result reflects fears over declining domestic consumption due to difficulties posed by high inflation and interest rates."

The gloomy prospects will have many companies conduct conservative investment, with 33.9% saying they will reduce investment. In addition, 53% said their investment will remain at last year's levels and only 12.6% answered that they will raise it.

If this year's sales projections were presented in the form of a weather forecast, sectors with "clear skies" include pharmaceuticals with expected growth of 2.7%, cosmetics 2% and electrical equipment 1.9%. For pharmaceuticals, the continuation of COVID-19 is a positive factor, and for cosmetics, recovery in Chinese consumption is expected to fuel the sector's rebound.

Sectors dependent on raw materials and sensitive to global demand are expected to see a "cold wave" of negative growth, like non-metals with 2.9%, oil refining and chemicals 2.8%, textiles 2.4%, and information technology and home appliances 2.3%. A "slightly clear skies" of minor growth is forecast for food with 0.6%, cars 0.5%, shipbuilding 0.4% and precision medicine 0.3%, while "cloudy" with minus growth is the expectation for wooden furniture with 1.9%, steel 1.5% and machinery 1%.

Write to Sungsu Bae at baebae@hankyung.com