Survey: 7 in 10 South Korean SMEs cite weak demand, rising costs

Dec. 22 (Asia Today) -- About seven in 10 South Korean small and medium-sized enterprises said they faced shrinking domestic demand and intensifying cost pressures this year, according to a survey released Monday by the Mainbiz Association.

The survey of 351 Mainbiz member companies found 71.8% cited weak domestic demand as a key management challenge in 2025, while 61.5% pointed to rising costs, indicating simultaneous pressure from softer sales and higher expenses, the association said.

More than half of respondents reported sales declined or remained flat, the association said, adding that many companies focused on short-term, conservative measures such as cutting costs and defending existing markets.

Looking to 2026, the most common outlook, cited by 39.9% of respondents, was that economic conditions would be similar to this year, the association said. Technology-based sectors and mid-to-large firms were relatively more optimistic, while domestic service industries and smaller businesses were more pessimistic.

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Companies also signaled restrained plans for next year. The survey found 58.7% said their strategy would be to maintain the status quo and 61.5% said they had no investment plans.

The association said reluctance to invest reflected multiple factors including economic uncertainty, internal funding constraints, limited information on digital and facility investments and difficulties securing specialized personnel. It said awareness of digital transformation and AI adoption is high, but implementation remains early-stage due to cost burdens and limited capabilities.

Respondents' top policy requests were financial support at 59.0%, workforce training and employment retention at 41.9% and technology development and research support at 32.5%, the association said.

Based on the findings, the association proposed six policy tasks aimed at supporting investment, workforce development and technology upgrades, including packaged support that links short-term liquidity with mid-term innovation investment, investment programs that reduce downside risk from failed projects and tiered assistance for digital transformation and AI adoption by company readiness.

An association official said the results suggest pressures on SMEs extend beyond a cyclical slowdown and require coordinated responses across costs, technology and workforce restructuring, calling for more integrated, stage-based policy support.

-- Reported by Asia Today; translated by UPI

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