Three in four firms expect to miss targets amid rising costs, tightening regulations

Cranes and shipping containers are seen at the Port of Pyeongtaek in April in Pyeongtaek, Gyeonggi Province. (Getty Images)
Cranes and shipping containers are seen at the Port of Pyeongtaek in April in Pyeongtaek, Gyeonggi Province. (Getty Images)

South Korean manufacturers are grappling with their bleakest profit outlook since the early days of the COVID-19 pandemic, with 3 out of 4 companies expecting to miss their targets this year, amid climbing costs, global trade unpredictability and tightening domestic regulation, an industry survey showed Monday.

According to a survey conducted by the Korea Chamber of Commerce and Industry last month, 75 percent of 2,275 manufacturing companies responded that their 2025 operating profits would fall short of their targets set at the beginning of the year. That figure is higher than the 74 percent recorded in 2020, at the onset of the pandemic.

Only 20.4 percent anticipated meeting their goals, while 4.6 percent expected to outperform them.

Among respondents, 32.1 percent of firms projected an operating loss, exceeding the 27 percent expecting a profit. The proportion of companies that shifted from surplus to deficit reached 7.1 percent, more than double the 3.1 percent that said they would turn profitable this year.

KCCI said manufacturers are facing difficulties with weak domestic demand and slow consumer spending recovery, while the construction sector downturn continues to drag down the broader economy.

Rising costs emerged as a major source of strain: 42.5 percent of respondents identified higher raw materials prices as their top management challenges, while 30.4 percent pointed to higher labor costs, followed by 8.9 percent citing increased tariffs and 8 percent mentioning higher interest rates and financing expenses.

Many companies also worry about increased regulatory pressure. Over 44 percent said that legislative requirements have grown more onerous this year, while 50.5 percent said that the demands remain the same. Only 5.2 percent reported relief in regulatory conditions.

As the National Assembly has been pushing for various business bills, 50.5 percent of manufacturers identified potential corporate tax hikes as their top concern, followed by 40.6 percent citing stricter corporate regulations under the Commercial Act and Fair Trade Act revisions. Rising labor-related burdens came to 38.6 percent, while other concerns included stricter environmental and land-use regulations with 21.6 percent and retirement age extension issues with 13.5 percent.

The business group urged policymakers to focus on legislation that would ease the burden on companies. It warned that imposing additional tax or regulatory burdens, coupled with already high material and financing costs, could dampen investment and hinder economic recovery.

“South Korean companies are enduring multifaceted risks at once, from tariff pressures to weak domestic demand and surging costs, amid rapid changes in the domestic and international political and economic environments this year,” said Kim Hyun-soo, head of the economic policy team at KCCI.

“With the business condition deteriorating on all fronts and corporate sentiment hitting rock bottom, now is the time for the National Assembly and the government to give Korean companies the support through legislation.”

The KCCI also called for two-track support measures, providing bold incentives such as tax credits and subsidies for high-tech sectors like semiconductors, while supporting struggling industries like steel and petrochemicals through special legislation aimed at restoring competitiveness.


sahn@heraldcorp.com