Domestic Companies Say "Economic Recovery from 2025"... Impact of High Inflation and High Interest Rates

KCCI's '2024 Business and Economic Outlook' Survey
'Stability' Chosen as This Year's Business Strategy by 55.5%
High Raw Material and Oil Prices Seen as Most Threatening Risks

Our companies surveyed expect the full-scale economic recovery to begin next year.

According to the Korea Chamber of Commerce and Industry on the 18th, a recent survey titled '2024 Management and Economic Outlook' conducted among 2,156 manufacturing companies nationwide showed that 40.1% of respondents answered that the economic recovery would start 'from next year,' the highest proportion.

Office workers are hurrying on their way to work near Gwanghwamun Intersection in Jongno-gu, Seoul. Photo by Jo Yongjun jun21@

The response 'second half of this year' followed at 34.2%, and 'after 2026' was 16.9%. In contrast, only 8.8% answered 'first half of this year' or 'already in recovery phase.' Regarding this, the Korea Chamber of Commerce and Industry stated, "This year is expected to show a gentle U-shaped curve with a low start and high finish."

This outlook by companies appears to be due to the ongoing effects of high inflation and high interest rates. Since corporate loan interest rates surpassed 5% last year, high interest rates have persisted, and despite eight freezes of the base interest rate, loan interest rates actually showed an upward trend in the second half of last year.

Although the Producer Price Index fell by 0.4% month-on-month in November last year, it remains at a high level compared to early 2021 before the price surge began, and unstable international conditions with the possibility of a sharp rise in international oil prices also seem to have contributed to concerns.

Regarding this year's management strategies, 35.0% of companies chose 'growth,' which is more than three times the 9.5% who chose 'downsizing.' However, 55.5% of companies opted for 'stability,' indicating that more companies prefer to observe the economic recovery trend.

Regarding specific business performance such as sales, exports, and investment, many respondents expected results similar to last year. For exports, 44.3% of companies forecasted 'the same level,' the highest proportion. Meanwhile, companies expecting 'increase' and 'decrease' were 27.7% and 28.0%, respectively.

For investment, 46.4% of companies anticipated 'the same level,' the highest proportion, while 29.5% expected a 'decrease,' and 24.1% expected an 'increase.' Sales responses showed no significant differences across categories.

Companies identified the most threatening domestic and international risks this year (multiple responses allowed) as high raw material and oil prices (51.1%) and funding burdens such as high interest rates (46.6%). This was followed by labor supply and labor-management conflicts (21.6%), prolonged export sluggishness (20.0%), and unexpected issues such as war (14.2%).

Additionally, for the most important policy tasks to support economic recovery this year (multiple responses allowed), most selected price management and interest rate normalization (71.0%). This was followed by easing corporate regulatory burdens (31.2%), strengthening export competitiveness (27.0%), labor market reform (21.7%), managing external risks such as US-China conflicts (19.8%), and expanding support for national strategic industries (11.9%).

Kim Hyun-soo, head of the Economic Policy Team at the Korea Chamber of Commerce and Industry, said, "Since the end of last year, signs of economic recovery centered on exports have appeared, but it will take some time to feel the effects. To turn the crisis into a driving force for innovation, both the government and companies need to prepare for immediate risks such as high inflation and high interest rates and secure long-term potential through investment and support in new industrial sectors."