South Korean companies operating in Europe are reeling from the coronavirus pandemic that has devastated the region, a survey showed Monday.
The domestic situation is also dismal, with the business sentiment that gauges the nation’s export outlook hitting the lowest level in 135 months.
The Korea International Trade Association surveyed 80 Korean companies doing business in Europe between Wednesday and Friday.
According to the survey, 41 companies said the damage was “very serious” and 31 companies said it was “quite serious,” with 90 percent of the companies surveyed complaining of losses due to the COVID-19 spread.
By type of damages incurred, 69 percent said that sales are declining due to falling local demand and 58 percent said that sales channels such as dealer shops and sales outlets have been suspended. They also cited difficulties in logistics and transportations and cancellation of exhibitions and buyer meetings.
Companies have been “adjusting and canceling production and existing orders,” and also “reducing workforce,” “looking for alternative logistics and transportation” and “request for local government funding.”
“As European countries strictly control not only business activities such as exhibitions and counseling sessions, but also their daily lives, this deals a heavy blow to business operations,” said Park Yeon-woo, director of KITA’s Brussels office.
Large Korean companies, including Samsung Electronics, LG Electronics and Hyundai Motor, have already shut down their plants in Europe as the number of confirmed cases of coronavirus are surging.
Samsung closed its television factories in Slovakia and Hungary and plants that produce home appliances in Poland. LG’s Mlawa TV plant in Poland has started to cut production. Hyundai’s Russian and Turkish plants also decided to shut down, effectively halting all overseas production bases.
As the pandemic takes a heavy toll on business at home and abroad, the crisis felt by companies persists, a local business association said.
A Korea Economic Research Institute survey of the nation’s top 600 companies by sales showed that the business survey index for April stood at 59.3. This is the lowest level in 135 months since the 52 recorded in January 2009 during the global financial crisis. The March figure also hit 65.5, the lowest in 134 months since February 2009 when it hit 62.4.
The index is an indicator of business sentiment and is calculated by surveying 15 items, including export counseling, contracts, export costs and profitability. The baseline is 100, the maximum value is 200 and the minimum zero.
By sector, in-country demand (64.3), exports (69.3), investment (74.8) funds (77), inventory (95.5), employment (79) and profitability (68.8) all recorded below the baseline.
By industry, automobiles (44.2), publication (46.2), travel and entertainment services (50), clothing and shoes manufacturing (50), wholesale and retail (52.2) and land and air transport (52.4) recorded low forecasts.
In the survey, the companies responded that business sentiment is more pessimistic than it was during the 2008 global financial crisis due to the impact of the supply shock caused by the slowdown in consumption and operation disruptions in countries around the world.
As the timing of the end of the economic crisis is uncertain due to the noneconomic cause of the epidemic, it is difficult to predict how much further the business sentiment will fall, KERI explained.
By Shin Ji-hye (firstname.lastname@example.org