View of Yeouido financial district (Yonhap)
Seven out of 10 Korean conglomerates do not have or have not yet established investment plans for next year due to increasing uncertainty such as expanding geopolitical risks and heightened trade protectionism, a survey by a leading business lobbying group showed on Tuesday.
The Federation of Korean Industries commissioned Mono Research to survey the domestic investment plans of the 500 largest Korean companies in terms of revenue and found that the majority of large companies are reluctant to make aggressive investments.
“Amid forecasts that the global economy will slow down in 2025 compared to this year, companies are attentive to downside economic risks, such as a decline in global trade due to deepening protectionism and supply instability stemming from continued geopolitical risks,” the FKI said in a statement.
According to the survey, 68 percent said they have not come up with a 2025 investment plan, and 11.4 percent had no plans to make an investment next year, showing a higher degree of unwillingness compared with the findings from the same questionnaire last year.
Among the 39 companies that made investment plans for next year, there were more cases of reducing the investment scale compared to this year than expanding it. Some 59 percent said the investment size will stay at a similar level.
Companies with undecided investment plans cited reorganization and personnel changes, prioritizing understanding of the impact of internal and external risks and unclear domestic and international economic prospects for next year as reasons for not being able to establish a program.
Enterprises also blamed the negative domestic and global 2025 economic outlook and deteriorating domestic investment environment such as strengthening corporate governance regulations for reducing their investment scale.
The biggest obstacle impeding domestic investment was the lack of financial support such as taxes and subsidies for facilities and research and development investment. Toughened regulations tied to corporate governance and expansion of facilities also hindered companies from making new investments.
Corporate investment has been the key to overcoming tough economic times, but recently, companies have struggled to gain momentum to expand investment, Lee Sang-ho, head of the FKI's Economic and Industrial Research Division, pointed out.
“To help businesses to set up investment schemes, there is a need for bold incentives such as subsidies and tax breaks,” he said.
Sluggish domestic demand and greater trade protectionism risks with the advent of Donald Trump's second presidential term have punctured business sentiment here.
In a separate survey released Monday, some 61 percent of Korean companies said they would implement austerity management next year by cutting costs and investment, hitting the highest in the last nine years.
According to Korea Enterprises Federation’s research on next year's business outlook, company executives believe that the country’s economic recovery will begin after 2026.
Last week, The Bank of Korea slashed its forecast for 2025 to 1.9 percent amid slowing export growth and weak domestic demand.
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