Nine out of 10 small business owners said next year's business environment will be similar to this year or worse. Concerns were high about prolonged high inflation and weak domestic demand.
The Korea Federation of Small and Medium Enterprises announced on the 16th the results of its "Survey on Small Business Management Conditions and Policy Tasks," conducted from the 4th to the 21st of last month on 800 small businesses in retail and wholesale, lodging and food service, manufacturing, and other sectors.
The survey found that 51.3% of small business owners expect next year's business environment to be similar to this year, and 38% said it will deteriorate. Only 10.8% offered a positive outlook that conditions will improve.
The biggest business burden felt by small business owners this year was most often cited as high inflation, including rising raw material and ingredient costs. This was followed by sales declines due to domestic demand slump (48.0%), rising labor costs and difficulty securing workers (28.5%), and loan repayment burdens (20.4%).
However, 97.4% of small business owners was found not to be considering closing. Analysts said this reflects the high share of livelihood-driven startups amid a tough job market and preparation for old age.
Small business owners' use of online platforms is gradually expanding. The overall platform entry rate among small businesses was 28.1%, up 3.5 percentage points from a year earlier. Lodging and food service showed a high rate of platform use. Among small businesses on platforms, platform sales accounted for 44.3% of total sales. For retail and wholesale and manufacturing, the figures were 20.3% and 15.5%, respectively.
Financial burdens remained heavy. One in four small business owners said their loan size increased from a year earlier, and 90% of those using loans said they feel burdened by interest and principal and interest repayments. The average lending rate on current loans was 4.4%.
Perceptions of this year's consumption-boosting policies differed by industry. More than half of lodging and food service businesses said they felt the policies were effective. However, retail and wholesale (18.0%) and manufacturing (8.5%) reported low levels of perceived effectiveness. Among respondents who felt the policies worked, many said the impact was temporary, raising the need for mid- to long-term support.
The most needed policy task for small business owners was "support for revitalizing domestic demand and consumption," cited by 49.5%. Calls also continued for financial support and sales channel support (41.5%). As priorities for the National Assembly and the government, respondents pointed to boosting consumption and reviving regional economies (52.1%), rising labor costs and labor shortages (45.0%), and easing financial burdens from high interest rates (42.8%).
Chu Mun-gap, head of economic policy at the Korea Federation of Small and Medium Enterprises, said, "With high inflation and weak domestic demand persisting and now a strong dollar piled on, the business environment for small business owners is worsening," adding, "Consumption policies such as consumption coupons for livelihood recovery had some effect but were short-lived, so it is necessary to pair them with mid- to long-term growth policies that small business owners can feel."