Middle East Cost Shock Hits Korean SMEs, Small Businesses Suffer Most

South Korean small and medium-sized enterprises are grappling with a "cost shock" originating from the Middle East, with smaller businesses bearing the brunt of the impact. Prolonged geopolitical risks have driven up prices for raw materials and energy, while also increasing logistics expenses, creating a mounting burden on businesses.

The severity of the financial strain is particularly acute for companies with fewer than 10 employees. A survey by the Korea Management Innovation SME Association revealed that 31.3% of businesses with 9 or fewer employees reported extreme management difficulties due to the ongoing international political situation. This contrasts with larger companies, where no firms with 300 or more employees reported such severe issues.

Overall, 56.3% of surveyed SMEs indicated that the prolonged international political landscape is negatively affecting their business operations. When asked about the biggest threats, SMEs identified rising production costs as a more significant concern than supply chain disruptions. This suggests that the immediate increase in operational expenses is a more pressing issue for these businesses than the availability of goods.