SEOUL, Sept. 4 (Korea Bizwire) — Nearly half of South Korea’s top businesses are expected to see their sales shrink this year due to a global economic slowdown and weak domestic demand, market observers said Friday.
According to market analysts, only 56 percent of the country’s 300 largest firms by stock market capitalization are expected to see their sales grow in 2015 from a year earlier.
The ratio marks the lowest since 2002 and compares with 69 percent in 2014.
“The number of companies with growing sales is decreasing steadily amid the slowing growth of the gross domestic product (GDP),” an analyst from HI Investment & Securities Co. said. “Companies that grow in size will become more and more rare.”
The Bank of Korea, the country’s central bank, said Thursday that the country’s GDP grew 0.3 percent from three months earlier in the April-June period, slowing from a 0.8 percent on-quarter expansion in the first quarter.
The analysts said local firms were already experiencing significant drops in sales, though their profitability was improving due to a cut in costs on lower global energy prices.
In the first half, the combined sales of 506 manufacturing firms that end their fiscal year in December shrank 4.7 percent from the same period last year.
The anticipated drop in sales was also attributed to the lack of new growth engines.
“The country’s potential growth rate has dipped to the mid-3 percent range from around 5 percent at the beginning of the 21st century amid a prolonged downturn in local and global markets,” said Kim Cheon-koo, a researcher from the Hyundai Research Institute.
“The country needs to quickly restructure its economy to restore its growth potential and ability to recover.”