Survey of 500 People... "Urgent Need to Expand Low-Interest Loans"
The worries of self-employed people are deepening, and on the 3rd, a restaurant in Myeongdong, Seoul, is quiet. Photo by Mun Ho-nam munonam@
[Asia Economy Reporter Moon Chaeseok] Despite the lifting of COVID-19 social distancing measures, sales for self-employed business owners this year have decreased by more than 10% compared to last year, according to a survey. It was found that about four out of ten are considering closing their businesses.
On the 12th, the Federation of Korean Industries (FKI) announced that it conducted a survey through the market research firm Monoresearch targeting 500 self-employed individuals in sectors such as restaurants, lodging, wholesale and retail, and other services regarding their performance this year and outlook for next year. A significant number of self-employed respondents anticipated that the economic downturn would continue into next year.
The response rate for those who said their sales decreased compared to last year was 68.6%. Those who reported a decrease in net profit reached 69.6%. On average, sales this year were found to have decreased by 12.5% compared to last year. Net profit also declined by 12.4%.
More respondents expected sales to decline next year compared to those who did not. 53.2% answered that sales would decrease next year compared to this year, and 54% said net profit would decline. On average, sales are expected to drop by 3.1% and net profit by 3.8% next year compared to this year.
Respondents cited increases in raw material and supply costs (22.8%), labor costs (21.5%), rent (20%), and loan principal and interest repayments (14%) as the biggest cost factors impacting business performance.
Financial conditions were also found to be tight. The average loan amount among respondents was approximately 99.7 million KRW. 72% reported loan amounts under 100 million KRW, while about 16% had loans exceeding 150 million KRW.
The average interest rate burden was 5.9%, about 2 percentage points higher than last year. 21% of respondents reported having high-interest loans with rates of 8% or more. Business conditions are challenging enough to require loans over 100 million KRW, and interest rates are rising simultaneously.
Regarding the timing of economic recovery, about 60% of respondents answered "after 2024." Those who believed recovery would occur by the second half of next year accounted for 40.8%. The breakdown was 31.4% for the second half of next year, 22.8% for the first half of 2024, and 22.2% for after 2025. Only 9.4% expected recovery in the first half of next year.
Furthermore, about 40% said they are considering closing their businesses within three years. The reasons cited included ▲continued deterioration of business performance (26.4%) ▲uncertain economic recovery prospects (16.1%) ▲worsening financial conditions and loan repayment burdens (15.1%).
For management difficulties expected next year, respondents pointed to ▲rising rent and various tax burdens (23.1%) ▲loan repayment burdens (21.2%) ▲increased raw material purchase costs due to rising import prices (19.7%).
Necessary government support policies mentioned included ▲expansion of financial support such as low-interest loans (20.9%) ▲support for consumption promotion (17.8%) ▲restraining increases in public utility charges (13.3%).
Yoo Hwan-ik, head of the Industry Division at FKI, emphasized, "The proportion of self-employed in Korea is about 25%, the highest among OECD countries, so if self-employed businesses struggle, the everyday economy could be shaken. Given that the economic crisis effects are expected to continue at least until next year due to factors like war, detailed policy support must continue for the time being."
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