Six Out of Ten Small Business Owners in Neighborhood Districts Expect Economic Downturn in Second Half

Outlook Especially Grim for Laundry, Beauty, and Real Estate Sectors
"Expansion of Tax Benefits" Tops List of Policy Demands

As high inflation and sluggish domestic demand persist, a recent survey found that six out of ten small business owners in local commercial districts expect business conditions to deteriorate even further in the second half of this year. In particular, those in laundry, beauty services, and real estate brokerage expressed greater concern over worsening conditions compared to other sectors.

Image of the survey results from the Korea Federation of SMEs. Korea Federation of SMEs

On July 16, the Korea Federation of SMEs announced the results of its "First Half Business Conditions and Second Half Outlook for Small Businesses in Local Commercial Districts" survey, conducted with 505 small businesses operating in local commercial areas.

According to the survey, 63.6% of respondents stated that overall business conditions in the first half of this year had worsened compared to the second half of last year. Additionally, 59.8% anticipated that conditions would deteriorate further in the second half of the year compared to the first half. While projections for second-half performance—across indicators such as access to funds, sales, and operating profit—showed slight improvement over first-half results, negative responses remained dominant.

Looking at sales outlooks by industry, a particularly high proportion of businesses in laundries and beauty salons (72.7%), real estate brokerages (70.0%), private academies (68.0%), and pubs, bars, and pojangmacha street vendors (63.3%) expected their sales to decline. By contrast, only 41.2% of café and bakery businesses anticipated lower sales, suggesting that these sectors are less affected by adverse economic conditions.

As for the reasons behind the negative outlook for the second half, the most cited was "declining consumer spending power due to high inflation and income disparity," at 60.9%. This was followed by "rising operational costs such as raw material, rent, and labor" at 23.5%. Notably, 96.6% of respondents said they had "no investment plans" for the second half, indicating a significant decrease in investment sentiment among small business owners.

The survey also identified differences according to whether businesses were listed on online platforms. Businesses not registered with online platforms reported a rate of negative responses regarding financial conditions, sales, and operating profit that was more than 7 percentage points higher than their online-registered counterparts, suggesting that securing online sales channels can partially cushion the impact of an economic downturn.

When asked about the most needed government support measures, the most common response was “expansion of tax benefits” (65.7%), followed by “reduction in energy costs such as electricity and gas fees” (52.1%), “expansion of financial support including policy funds and guarantees” (43.6%), and “relief for loan extension and principal and interest repayment burdens” (31.7%).

By industry, demand for reduced energy costs was relatively high among restaurant and lodging businesses. Clothing and miscellaneous goods retailers, supermarkets, and accommodation providers expressed greater need for consumption-promoting policies such as consumer coupons.

Kim Heejoong, head of the economic policy department at the Korea Federation of SMEs, said, “Currently, small business owners are seeking expanded tax benefits and relief from energy costs even more than increased policy funding,” adding, “Customized support that reflects the business environment and characteristics of each sector is needed.”

This content was produced with the assistance of AI translation services.