Half of Korean firms have no investment plans for 2023 amid economic slowdown

Half of the South Korean conglomerates have yet to set investment plans for next year due to uncertainties in the business environment with the fund market in the doldrums and higher exchange rates.

According to Mono Research’s survey on 500 top corporations requested by the Federation of Korean Industries (FKI), 10 percent of the firms said they had no domestic investment plans for 2023 and 38 percent said they have yet to set a plan. In the survey, 48 percent of 100 firms responded to the questionnaire.

About 28.6 percent of the firms said they can’t increase investment because of the financial market crunch and fundraising challenges, 18.6 percent blamed it on the weakening Korean won against the dollar and 17.6 percent pointed out easing demand in the domestic market.

Although 52 percent of the surveyed said they had investment plans for next year, 67.3 percent of them said next year’s investment size would be similar to the current year, indicating that overall investments for next year would be sluggish. About 13.5 percent of the firms said they would increase investment. Of that total, 52.4 percent said it was to secure future directions, 19 percent to get ahead of competition and 14.3 percent said to strengthen their competitiveness.

About 29 percent of the respondents predicted the investment environment would improve in the second half of next year, while 24.0 percent projected at the first half of 2024. They also chose global economic slowdowns (29.1%) and the continued strength of the dollar (21.3%) as primary risks undermining investments. In addition, they also mentioned surging inflation (15.3%), global tightening (15.3%), and overwhelming private loans (9.7%).

The firms called for the government to come up with measures to help them, such as slowing the pace of benchmark interest rate hikes (24.6%), improving the financing environment (22.0%), and easing regulations (14.7%), and corporate tax cuts (13.7%).

“Companies will likely face challenges in the market next year amid economic recessions,’’ said Choo Kwang-ho, head of the FKI’s economic research division. “The government must come up with solutions to ease the market crunch.”