Posted on 28 Oct 2008
Korean businesses, big or small, are feeling growing pains from the global financial crisis and economic slowdown.
The sagging global economy is curbing consumer spending not only in developed countries but also in emerging economies, hitting Korean exporters.
Some of the nation's exporters have slashed production and/or investments due to reduced global demand. Korean companies are also struggling with sluggish domestic demand as the prices of homes, stocks and other assets have been tumbling amid the liquidity squeeze.
A poll showed yesterday that nearly 80 percent of 300 companies questioned said the current business conditions are similar to or more difficult than it was during the 1997-98 Asian financial crisis.
Small and medium-sized enterprises are feeling more pain than big businesses, according to the survey released by the Korea Chamber of Commerce and Industry, a business lobby group.
Exporters hardest hit by slowdown
About 86 percent of SMEs that participated in the survey said current business conditions are similar to or more difficult than a decade ago. Nearly 60 percent of large companies gave the same answer.
About 54 percent of the businesses polled singled out the economic downturn as the biggest obstacle they face, while some 20 percent picked worsening liquidity such as difficulty in raising funds and 19.4 percent pointed to declining operating profits.
To help ease liquidity shortages for banks and shore up the economy, the Bank of Korea yesterday cut its key interest rate by 75 basis points, the biggest cut in nearly a decade.
The nation's exporters are being hit the hardest by the faltering global economy.
Eight major industries that account for 60 percent of the nation's exports are forecast to post lower-than expected growth of 10.5 percent in 2009, the ministry said.
Samsung Electronics, the nation's top exporter, on Friday reported a 44 percent fall in net profit in the third quarter and presented a grim outlook for the next quarter in the face of the slowing global economy.
"An economic slowdown that has started in the
"We expect the global economy to recover in the latter half of next year at the earliest," he said at a press briefing on Friday.
He indicated the macroeconomic difficulties may force the electronics giant to trim its investment next year. The world's top maker of memory chips and liquid crystal displays has already cut its investment in the memory business this year by "tens of millions of won" from the original 7 trillion won.
Companies cut output, investment
Hynix, the world's No. 2 memory chip maker and Samsung's cross-town rival, has closed some production lines. It is expected to post its fifth consecutive loss in the third quarter.
Hyundai Motor, which posted its lowest quarterly operating profit since 2000, also slashed its car sales outlook for this year by 90,000 to 3.02 million.
Hyundai, the world's No. 6 auto maker along with its affiliate Kia Motors Corp., has recently cut output at its car assembly plant in Alabama, the United States, by about 15,000 from the planned 260,000 this year.
The nation's major steelmakers have also trimmed output due to lower demand from the manufacturing sector and higher raw material costs.
POSCO, the world's No. 4 steelmaker, said last week that it will drop its stainless steel production to 340,000 tons, 30 percent down from the originally planned 490,000 tons during the fourth quarter. Its smaller rivals have also announced plans to scale back output.
POSCO posted a record quarterly profit in the third quarter, but the company said it faces difficulty in the fourth quarter due to slower demand growth from autos and construction.
"The fourth-quarter business outlook is seen to be tougher as the global financial crisis will slow steel demand growth from the auto and construction sectors, while higher input costs and a tumbling won currency will add further pressure," POSCO said in a statement.
The nation's shipbuilders have been also seen orders for new ships fall amid a sluggish global economy.
