Seoul: South Korea's business sentiment improved for the third straight month in May amid eased concerns about political instability and the United States' sweeping tariff scheme, a central bank poll showed Wednesday. The Composite Business Sentiment Index (CBSI) for all industries came to 90.7 in May, up 2.8 points from the previous month, according to the survey by the Bank of Korea (BOK).
According to Yonhap News Agency, the index marks the highest level since November, when it stood at 91.8, and represents the sharpest gain since May 2023, when it added 4.4 points from a month earlier. The CBSI among manufacturers climbed 1.6 points to 94.7 in May, while nonmanufacturers saw an increase of 3.6 points to 88.1. The index measures corporate prospects for business conditions, with a reading below 100 indicating more pessimists than optimists.
Business sentiment had deteriorated since late last year, hitting the lowest level in about 4 1/2 years of 85.3 in February, primarily due to former President Yoon Suk Yeol's declaration of martial law and uncertainties triggered by U.S. President Donald Trump's new tariff scheme. Following the imposition of martial law, Yoon was impeached in late December and formally removed from office in April, paving the way for the presidential election scheduled for next Tuesday.
Another key factor behind the improvement in business sentiment was the U.S.' announcement in April to pause the imposition of reciprocal tariffs on trade partners, including a 25 percent duty on South Korean imports. Negotiations are ongoing between South Korea and the U.S. on the tariff scheme, with both sides agreeing to pursue a "July package" deal addressing trade and related issues, aiming for an agreement before July 8, when Trump's 90-day suspension of the tariffs is set to expire.
The outlook for May also added 3.2 points to 89.5, the survey showed. "Despite the improvement, the index remains below the long-term average of 100, so it is difficult to view the current situation as optimistic," BOK official Lee Hye-young stated during a press briefing. "The U.S. tariff postponement had a positive effect on the manufacturing sector, but it is likely a short-term benefit. As overall exports remained weak, it remains to be seen whether this upward trend will continue," the official added.
The poll, conducted earlier this month, involved 3,297 companies, including 1,852 manufacturing firms, the BOK reported.