As risks in the Middle East escalate, domestic business outlook has declined. While exports, particularly in semiconductors, have increased, most indicators related to cash flow, domestic demand, and profitability remain below baseline levels.
The Korea Economic Association (KEA) reported on July 28 that the Business Sentiment Index (BSI) forecast for August stands at 89.9. This marks an 8.1-point drop from the previous month’s figure of 98, falling back into the 80s for the first time in three months since May's 87.5.
Typically, a BSI above 100 indicates a positive outlook compared to the previous month, while a score below 100 signifies a negative outlook. The BSI has remained below 100 for five consecutive months since April's forecast of 85.1. The drop into the 80s is the first since May.
Both manufacturing and non-manufacturing sectors reported poor outlooks. The manufacturing forecast fell to 88.4, down 7.2 points from the previous month, while the non-manufacturing sector dropped to 91.5, a decrease of 9.1 points, reversing last month’s positive outlook.
Within manufacturing, only the electronics and communication equipment sector (118.8) and the food and beverage sector (105.6) exceeded the baseline. In contrast, the petroleum refining and chemical sector recorded a low of 57.7, the lowest level since February 2009, following the global financial crisis.
The KEA attributed these results to the prolonged conflict in the Middle East, which has increased raw material and energy costs, worsened petrochemical spreads, and created uncertainties in supply chains.
In the non-manufacturing sector, most industries, except for leisure, accommodation, and food services (116.7), fell below the baseline, including electricity, gas, and water (73.7), construction (87.8), information and communication (92.3), and retail (93.0).
Export forecasts maintained a baseline score of 100.0, continuing a relatively favorable trend for three consecutive months. However, domestic demand (90.8), cash flow (87.8), profitability (93.5), employment (95.0), and investment (97.0) all recorded scores below the baseline.
Lee Sang-ho, head of the KEA's economic division, emphasized the need for ongoing support to alleviate the burden of raw material and logistics costs and to ensure that restructuring efforts in the struggling refining and petrochemical industries proceed without disruption.
Meanwhile, the BSI for July recorded a figure of 94.4, remaining below 100 for four and a half years since February 2022's 91.5.
* This article has been translated by AI.
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