Economists expected that semiconductor exports would remain strong and lead our economy even amid the ongoing economic slump.

According to the Business Survey Index survey conducted by the Korea Economic Association targeting the top 600 companies in terms of sales, the BSI outlook for October 2024 was 96.2.

The BSI outlook rebounded 3.3p compared to last September (92.9), but has been below the baseline of 100 for 31 consecutive months since April 2022 (99.1).

The BSI performance in September was found to be 89.9. It has been sluggish for 32 consecutive months since February 2022 (91.5), showing that the deterioration in corporate performance is prolonged.

The October business outlook by industry is expected to be sluggish in both manufacturing (96.4) and non-manufacturing (96.0). The manufacturing BSI has remained below the baseline for seven consecutive months since exceeding the baseline of 100 in March of this year (100.5) and April (98.4). The non-manufacturing BSI has fallen below the baseline for three consecutive months since exceeding the baseline of 100 in July of this year (105.5).

The outlook for the October manufacturing industry varied greatly depending on the export sector of each detailed industry (10 in total). △General/Precision Machinery and Equipment (115.0) △Non-Metallic Materials and Products (107.1) △Electronics and Communication Equipment (106.3) △Automobiles and Other Transportation Equipment (105.4) The four industries showed a favorable outlook. Excluding these, the remaining six industries (Note 4) are expected to see a deterioration in business conditions.

The Korea Economic Daily forecasts that semiconductor exports will continue to show strength as the manufacturing BSI is expected to be favorable for electronics and communication equipment (106.3) including semiconductors, and general and precision machinery and equipment for semiconductor components (115.0). Automobile exports are also expected to rebound as automobiles and other transportation equipment (105.4) surpassed the baseline of 100 for the first time in seven months. On the other hand, other industries are estimated to have a negative outlook due to the prolonged high interest rates and the aftereffects of shrinking domestic demand.

The October survey sector BSI showed a negative outlook in all sectors (△Export 98.1 △Profitability 95.9 △Employment 95.6 △Domestic demand 95.4 △Funding conditions 94.0 △Investment 90.2 △Inventory 103.0). Although it did not reach the baseline, exports (98.1) rebounded 3.6 points compared to September (94.5), while domestic demand (95.4) fell 0.9 points compared to September (96.3). Investment (90.2) showed the lowest level in 18 months since April 2023 (88.6). The triple slump in domestic demand, exports, and investment has continued for four consecutive months since the outlook was first published in July of this year.

The Korea Economic Research Institute interpreted that the domestic demand and investment slump is continuing due to the prolonged geopolitical conflict and the expansion of external uncertainties such as the US presidential election, in a situation where investment and consumption capacity have been greatly reduced, with corporate and household loan delinquency rates showing similar patterns to the COVID-19 period.

Lee Sang-ho, head of the Economic and Industrial Affairs Division at the Korea Economic Council, said, “Despite the recent high growth in exports, the economic recovery in the fourth quarter is uncertain due to the prolonged slump in domestic demand, including a decline in consumption.” He argued, “In order to stimulate domestic demand and expand investment, we need to stabilize interest rates and avoid legislation that stifles corporate vitality (such as expanding directors’ duty of loyalty and mandating a cumulative voting system).”