Exports, hiring, investment to remain sluggish next year
Clouding the prospects of the already-sagging economy, the nation will likely continue to face tectonic challenges next year such as declining exports coupled with sluggish employment and investment. Major businesses are becoming defensive, reminiscent of bears going into winter hibernation. No one can blame them as they are desperate to cope with the harsh situation.
A survey released on Sunday by the Korea Enterprises Federation (KEF) vividly testifies to this dire outlook. It shows that only 54.2 percent of respondents have managed to set up their New Year business plan. More than 90 percent of them preferred either belt-tightening measures or maintaining the status quo. They are poised to focus on saving costs (72.4 percent), securing liquidity (31 percent) and realigning human resources management (31 percent).
Adding fuel to this fire, the nation's exports will likely remain lackluster at zero growth next year. The envisioned slowdown of outbound shipments is ever more serious as they have been buttressing the national economy. A survey on export prospects for 2023 showed businesses expect overseas sales to increase by only 0.5 percent from this year.
The poll, released by the Federation of Korean Industries (FKI), was conducted on enterprises of 12 major business sectors. Among some 150 companies that answered the survey, those in leading export items such as energy, electronics and petrochemicals estimated that growth will turn to negative territories.
Energy and petrochemicals are forecasted to contract by 1.9 percent and 0.5 percent, respectively. Weakened export competitiveness, arising from high-priced resources and materials paired with the continuing economic recession in major export markets, is considered a major obstacle in outbound shipments. This is an alarm bell to the national economy, which has a heavy reliance on exports.
A decline in exports may lead to an expanding trade deficit, dealing blows to fiscal soundness and external credit, thus dampening the economic vitality of the nation. This, therefore, requires the government and businesses to strengthen their commitment to rejuvenating exports. Fortunately, many governments have recently begun to show an intention to purchase South Korea's nuclear reactors and military weapons.
Against this backdrop, the role of the government, in particular, is significant. The Yoon Suk-yeol administration should engage more proactively in negotiations with relevant governments to facilitate the exports of products as they are pertinent to national security and infrastructure. It is encouraging that the exports of related products have been showing signs of booming recently, boosted by the government's endeavors.
Yoon vowed to fully support businesses in their bids to increase exports, calling on all relevant ministries to roll up their sleeves toward that end.
Regarding how to tackle the looming setbacks, 35.5 percent of KEF survey respondents cited the need to reduce costs, while 20.3 percent and 15.3 percent unveiled plans to refrain from further recruiting and postpone investments, respectively. Most of them wanted the administration to take more effective and feasible policies to boost investor sentiment.
What is noteworthy is that 25.4 percent of businesses replied that they would increase investments should the government-initiated bill for lowering the corporate tax pass the National Assembly. In the FKI poll, 38 percent of respondents wanted to get tax incentives when acquiring resources from abroad, citing it as essential to fortify their export prowess.
The Yoon administration should provide businesses with full-fledged support so that they can compete with their counterparts from other countries on an equal footing in global markets. For this, the government should get rid of unfavorable barriers in the way of their business activities. The national economy will be enhanced despite diverse looming challenges only when the government and the political parties join efforts to keep businesses afloat and let them gain momentum.
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