Major burdens for companies: COVID-19, raw material prices, interest rates

The resurgence of the coronavirus virus, increases in raw material prices and interest rates were the biggest concerns of companies here, a survey showed Monday.

The Korea Chamber of Commerce and Industry conducted a survey on 310 companies -- 104 conglomerates and 206 small- and midsize firms -- and found that those three factors were the major burdens affecting them and the economy.

In the survey, 81.6 percent of the companies chose the rise in raw material prices as a major concern, and 80.6 percent also chose the resurgence of COVID-19 cases. Multiple answers were allowed.

Borrowing cost increases followed in the list with 67.7 percent, while climate change and the trade conflict between the US and China came in at 47.4 percent and 46.8 percent, respectively.

Companies that could not shift the increase in production costs to consumers witnessed net profits decrease even when their sales went up, the KCCI said.

On interest rates, the KCCI advised against additional hikes, citing data from the Bank of Korea that the percentage of companies whose interest expense is bigger than their operating profits grew from 35.1 percent in 2019 to 39.7 percent in 2020.

The survey was conducted before the BOK raised the benchmark interest rate by 0.25 percentage point to 0.75 percent on Thursday, it added.

Companies were also suffering from the negative impacts of the COVID-19 pandemic, the findings showed, as 77.5 percent of the firms said they have not been able to overcome difficulties caused by the coronavirus crisis. Among those polled, 18.7 percent said they were able to.

Still, companies appeared to be hopeful as 57.8 percent expected the business situation to get better gradually. About 20 percent said their business operations would not fare much better even after the pandemic is over.

With the upcoming presidential election in March 2022, over half of the companies urged lawmakers to focus on economic agendas.

Survey results showed 75.8 percent of the firms demanded concentrated efforts from the political circle to resolve the economic crisis, while 69.4 percent wanted solutions for sustainable economic growth and 62.3 percent said lawmakers should not make election pledges that will burden the economy and businesses.

“How corporates perceive the business environment is reflected in the business sentiments and affects the economic flow,” Kim Hyun-soo, head of the industrial policy team at KCCI said, urging support from the government and lawmakers to revive business sentiment.

By Jo He-rim (herim@heraldcorp.com)