Middle East risks shake South Korean SMEs; production cuts inevitable if crisis lasts over 3 months

South Korean small and medium-sized enterprises are grappling with significant operational difficulties as escalating tensions in the Middle East drive up raw material prices and disrupt supply chains. A recent survey reveals the precarious situation, with a substantial number of businesses contemplating production cuts.

The survey, conducted by the Korea Federation of SMEs from May 15 to 31, polled 410 SMEs that rely on imported raw and intermediate materials. The findings underscore the immediate impact of the geopolitical instability, with 40% of respondents indicating plans to scale back operations if the current conditions continue for more than three months. This highlights a growing concern among businesses about the sustainability of their current production levels.

These SMEs are particularly vulnerable to fluctuations in global commodity markets and shipping routes, which have been directly affected by the conflicts in the Middle East. The disruption not only increases the cost of essential materials but also creates uncertainty about their availability, making it difficult for businesses to plan and maintain consistent production schedules. The potential for prolonged supply chain issues poses a significant threat to the stability and competitiveness of these vital economic players.