SMEs' Expectations for Economic Recovery Rise in Second Half... Top Business Challenge Is "Rising Raw Material Prices"

SMEs’ Economic Outlook for the Second Half Revealed

More Respondents Expect “Improvement” in the Second Half

Top Management Priority: “Risk Control”

Expectations for an economic recovery among small and medium-sized enterprises (SMEs) in the second half of 2026 have risen slightly compared to the first half. However, operational challenges stemming from rising raw material prices are expected to persist throughout the second half of the year.

Small and Medium Enterprises 2026 First and Second Half Economic Outlook. Korea Federation of SMEs

The Korea Federation of SMEs announced on July 21 the results of its "Survey on Management Challenges and Economic Outlook for the Second Half of 2026," conducted from July 1 to 7 with 500 SME participants.

Regarding the economic outlook for the second half of this year, 37.0% of respondents predicted a "worsening" economy, marking an 11.4 percentage point decrease from the first half. The proportion anticipating an "improvement" rose by 5.4 percentage points to 12.8%. Responses of "neutral" accounted for 50.2%, up from 44.2% in the first half.

The proportion of respondents expecting improvements in sales, operating profit, and cash flow has increased compared to the first half. Although expectations for improved "factory operation rates" have decreased, there was a significant increase in "neutral" responses for this item.

For the items assessing workforce, inventory, and facility levels, "neutral" responses dominated at around 80%, with only minor changes between the first and second halves of the year.

Management Challenges Faced by Small and Medium Enterprises in South Korea in the First and Second Half of 2026. Korea Federation of Small and Medium Business

When asked about domestic management challenges, "rising raw material prices" was cited most frequently at 27.6%. This was followed by "sluggish domestic demand" (18.5%), "rising labor costs" (14.5%), and "labor supply and demand shortages" (8.5%). SMEs expect that challenges such as sluggish domestic demand and workforce shortages will persist through the second half of the year.

For external management challenges, the most common responses were "rising prices of overseas raw materials" (23.6%), "increased exchange rate volatility" (16.9%), "increased logistics costs" (11.0%), and "geopolitical instability" (9.3%). All factors except for raw material price increases are expected to ease slightly compared to the first half.

For their top management strategies for the second half, SMEs prioritized "management risk control," such as responding to risks from exchange rates and tariffs (28.2%), followed by "core talent retention and capability strengthening" (24.2%), "improving management soundness" (23.8%), and "scaling up" (10.0%).

In terms of the most needed policies (multiple-choice ranking), SMEs selected "tax burden relief" (19.9%) as the top priority, followed by "financial support" (18.8%), "resolving workforce shortages" (15.0%), and "stabilizing supply of raw materials and logistics" (13.2%).

Heejung Kim, Director of Economic Policy at the Korea Federation of SMEs, stated, "Uncertainties surrounding raw material prices and sluggish domestic demand remain significant for SMEs. It is urgent to reduce management burdens through tax relief and financial support, which are most desperately needed by SMEs, as well as to provide detailed policy assistance that covers both domestic market revitalization and the management of external volatility."

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