SMEs Expect Slight Improvement in Business Outlook for the Second Half of 2025
Recovery of Domestic Economy Anticipated After 2026 by Majority of SMEs
Sluggish Domestic Demand Remains the Biggest Challenge
Tax Relief and Financial Support Cited as Most Needed Policies
The proportion of respondents expecting an improvement in the business conditions of small and medium-sized enterprises (SMEs) in the second half of this year has increased slightly compared to the first half.
On July 2, the Korea Federation of SMEs announced the results of its "Survey on Management Difficulties and Economic Outlook for SMEs in the Second Half of 2025." The survey was conducted from June 16 to June 20, targeting 500 SMEs.
According to the survey results, 13.8% of respondents expect the overall economic outlook for the second half of this year to "improve," which is a 6.2 percentage point increase from 7.6% in the first half. In terms of specific indicators reflecting the business conditions of SMEs, the outlook for the second half showed improvements compared to the first half in all areas: sales (from 8.4% to 14.8%), operating profit (from 8.4% to 14.8%), financial conditions (from 6.2% to 11.4%), and factory operation rate (from 9.6% to 10.4%). For reverse trend indicators, improvements were also observed in workforce level (from 18.6% to 13.6%), inventory level (from 9.6% to 8.0%), and facility level (from 2.8% to 1.2%).
The main management difficulties cited (multiple responses allowed) were sluggish domestic demand (from 51.2% to 49.8%), which remained the most significant issue, followed by rising raw material prices (from 43.6% to 41.0%), rising labor costs (from 39.6% to 38.4%), and difficulties in securing funds (from 21.4% to 21.2%). This suggests that management difficulties in the second half are expected to ease somewhat compared to the first half.
Meanwhile, 9 out of 10 SMEs (90.0%) responded that they expect the recovery of the domestic economy to occur "after 2026." Specifically, 54.4% of companies expect the domestic economy to recover in 2026 (31.8% in the first half of 2026 and 22.6% in the second half), while 35.6% expect recovery in 2027. Only 10.0% of companies expect recovery in the second half of this year.
As for the top management strategies for the second half, the most common response was strengthening internal management through cost reduction and restructuring (27.6%), followed by management risk control (21.6%), retention and enhancement of core personnel (17.0%), and external growth (10.0%). The most needed policies to revitalize SMEs (multiple responses allowed) were easing the tax burden (52.6%), financial support (45.8%), resolving workforce shortages (28.4%), and stabilizing the supply of raw materials (26.2%).
Choo Moongap, 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 somewhat compared to the first half, sluggish domestic demand remains a major management challenge. Therefore, the government should continue to implement mid- to long-term policies to stimulate domestic demand. Since one out of two SMEs (52.6%) identified easing the tax burden as the most needed policy, it is necessary to support SMEs' investment capacity by expanding tax credits for investment and to strengthen policy support for revitalizing SMEs, including resolving workforce shortages and stabilizing the supply of raw materials."
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