Six in 10 Major Korean Firms Have No Investment Plans for Next Year

Six out of 10 major Korean companies either have no investment plans for next year or have yet to finalize them, as businesses enter emergency management mode amid strengthening global tariff barriers, supply chain instability, and foreign exchange volatility. Concerns are growing that investment for securing future growth engines could remain depressed for an extended period unless domestic and external uncertainties are resolved.

According to the Federation of Korean Industries (FKI) on Wednesday, a survey of the top 500 companies by revenue found that 59.1% of respondents either have not established investment plans for next year or have none at all. Specifically, 43.6% said they have not yet determined their plans, while 15.5% said they have no plans whatsoever. The survey was conducted by Mono Research from December 19 to 24, with 110 companies responding. Compared to last year, "undecided" responses decreased by 13 percentage points, but "no plans" increased by 4.1 percentage points—indicating that more companies are abandoning investment altogether as risk-aversion intensifies.

Among companies that said their plans were undecided or nonexistent, four in 10 cited incomplete organizational restructuring and personnel decisions (37.5%). This was followed by the need to first assess the impact of domestic and external risks (25%) and unclear domestic and global economic outlooks for next year (18.8%). This suggests companies are delaying decisions because they cannot see through the fog surrounding the business environment.

Even companies that have decided to invest are reluctant to open their wallets. A combined 86.7% of respondents said they would maintain investment at this year's level (53.4%) or reduce it (33.3%). Only 13.3% said they would expand investment. Companies cited negative economic forecasts for next year (26.9%) and risks from high exchange rates and rising raw material prices (19.4%) as the main reasons for scaling back. Domestic market contraction (17.2%) is also holding companies back.

This corporate retrenchment stems from a "triple whammy" of supply chain instability, soaring exchange rates, and economic slowdown. Companies identified the spread of protectionism and supply chain instability (23.7%) and economic slowdowns in major economies (22.5%) as the top three investment risks for next year. Concerns about high exchange rates (15.2%) were also significant. Although U.S.-China tensions have temporarily eased, tariff wars could resume at any time, making it difficult to decide on supply chain restructuring such as reducing dependence on China, according to analysts.

Increased exchange rate volatility is further clouding the corporate outlook. The won-dollar exchange rate surged to 1,482.9 won in April this year before falling to the 1,350 won range three months later. It then climbed sharply again, closing at 1,475.5 won on December 5. The volatile exchange rate is a major factor making it difficult to establish funding and investment plans. A business community official said it is challenging both to convert dollars earned overseas into won and to convert domestic funds into dollars for investment.

Warning signs of economic slowdown in major economies are also chilling business sentiment. The Organisation for Economic Co-operation and Development (OECD) on Monday forecast U.S. economic growth at 1.7% next year, down from 2.0% this year. China's growth rate is also expected to fall from 5% this year to 4.4% next year. The Hyundai Research Institute also pointed to the Trump administration's tariff policies and uncertainty over Federal Reserve monetary policy as risks in a report released the same day. There are also concerns that the Bank of Korea's rate-cutting cycle could end early.

Prolonged domestic consumption weakness is another concern. Consumer sentiment remains subdued as household purchasing power weakens. Companies unanimously said comprehensive government support is needed to revive investment momentum. They ranked taxes and various levies (21.7%) as the biggest obstacle to investment, followed by labor market regulations (17.1%). The top policy priority companies want is expanded tax incentives and subsidies (27.3%). Stimulating domestic demand (23.9%) and stabilizing exchange rates (11.2%) were also cited as urgent tasks.

Investment in artificial intelligence, a future industry, has also contracted. Some 63.6% of responding companies said they have no AI-related investment plans. Less than 40% have established plans (12.7%) or are reviewing them (23.7%). Even among companies planning to invest, more than half (55.1%) are focusing on production efficiency rather than creating new businesses.

"Investment even by large corporations is contracting due to supply chain instability and heightened foreign exchange volatility," said Lee Sang-ho, head of the FKI's Economic and Industrial Division. "Along with efforts to stabilize exchange rates, institutional support such as tax incentives for advanced industries is urgently needed."