Small Business Outlook Improves for Second Half of 2026

The Korea Federation of Small and Medium Business (headed by Kim Gi-mun) released findings on July 21 from a survey conducted between July 1 and July 7, which involved 500 SMEs, excluding small business owners. The survey focused on business difficulties and the economic outlook for the second half of 2026.

Compared to the first half of the year, there is an improvement in the economic outlook for the second half, with responses indicating worsening conditions decreasing by 11.4 percentage points to 37.0%. Conversely, responses indicating an improvement increased by 5.4 percentage points to 12.8%, suggesting a slight rise in recovery expectations among SMEs.

Specifically, improvements were noted in the areas of sales, operating profit, and financial conditions, which all reported an increase in optimistic responses for the second half compared to the first half. While the positive outlook for factory operation rates slightly decreased, there was a notable increase in neutral responses.

In terms of judgment indicators, neutral responses constituted around 80%, indicating that the overall conditions are considered appropriate, with minor fluctuations observed between the first and second halves.

For 2026, the top domestic business challenges identified were rising raw material prices (30.6% to 27.6%), sluggish domestic demand (17.3% to 18.5%), increased labor costs (15.5% to 14.5%), and labor supply issues (8.2% to 8.5%). These challenges are expected to persist into the second half.

On the external challenges facing management in 2026, rising overseas raw material prices topped the list (21.6% to 23.6%), followed by increased exchange rate volatility (17.1% to 16.9%), rising logistics costs (11.6% to 11.0%), and geopolitical instability (10.5% to 9.3%). Aside from rising raw material prices, other key challenges are anticipated to ease compared to the first half.

When it comes to prioritized management strategies for the second half of 2026, managing operational risks (28.2%) emerged as the foremost strategy, followed by retaining and enhancing talent (24.2%), strengthening management stability (23.8%), and expanding business scale (10.0%).

In terms of policies deemed most necessary to revitalize small businesses, respondents indicated that easing tax burdens (19.9%), financial support (18.8%), addressing labor shortages (15.0%), and stabilizing raw material and logistics supply (13.2%) are critical.

Kim Hee-joong, head of the Economic Policy Division at the Korea Federation of Small and Medium Business, noted that while SMEs expect a slight improvement in the second half compared to the first half, uncertainties around raw material prices and sluggish domestic demand remain significant.