SMEs Expect Economic Improvement in Second Half Compared to First Half

Korea Federation of SMEs Conducts Survey on Management Difficulties and Second Half Economic Outlook
12% of SMEs Expect Improvement...Low Optimism for Short-Term Economic Recovery

The outlook for the business performance and economic conditions of small and medium-sized enterprises (SMEs) in the second half of the year has shown some improvement compared to the first half.

[Provided by the Korea Federation of SMEs]

The Korea Federation of SMEs announced the results of the "Survey on Management Difficulties and Economic Outlook for the Second Half of 2024" on the 20th. The survey was conducted with 500 SMEs. The percentage of companies that responded that the economic outlook for the second half of this year would improve was 12%, which is higher than the first half's business performance results ('improved' response at 8.2%), indicating that more SMEs have a positive outlook for the future economic conditions.

In terms of economic outlook by category, which reflects the management situation of SMEs, the proportion of companies expecting their business performance to 'improve' in the second half of this year also slightly increased. By sector, compared to the first half's results, the second half is expected to see increases in sales (10.2% → 13.6%), operating profit (7.4% → 12%), financial conditions (7.4% → 10%), and factory operating rates (10.9% → 12.8%), among others.

The main anticipated management difficulties for the second half (multiple responses allowed) were the rise in raw material prices and sluggish domestic demand, each accounting for 40.8% of responses, making them the highest concerns. This was followed by rising labor costs (32.8%) and interest rate increases (19.2%). The difficulties experienced in the first half were also raw material price increases (43.8%), sluggish domestic demand (41.8%), rising labor costs (35.4%), and interest rate increases (19.6%), showing similar response patterns to the second half.

Meanwhile, more than half (54.8%) of the respondents in this survey indicated that they expect the domestic economy to recover after 2026. Companies that expected the domestic economy to recover in 2025 accounted for 36.4%, while only 8.8% anticipated recovery within this year.

The top priority management strategy for the second half of 2024 was strengthening internal management through cost reduction and restructuring, accounting for 27% of responses. This was followed by risk management (20.2%), retention and capacity enhancement of key personnel (18.4%), and external growth (10.4%). The policies deemed most necessary to revitalize SMEs were tax burden relief, financial support, resolution of labor shortages, and stabilization of raw material supply, in that order.

Choo Moon-gap, Head of the Economic Policy Division at the Korea Federation of SMEs, stated, "Although the business outlook for SMEs in the second half is expected to improve, the degree of improvement is not significant, and a short-term economic recovery is difficult to expect." He added, "The government should promote policies to revitalize domestic demand and induce SMEs to secure investment capacity through tax burden relief and financial support." He also emphasized, "It is necessary to strengthen policy support so that SMEs can secure a growth foundation through labor policy flexibility and deregulation."