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Bayerische Repräsentanzen in Asien Up
Repräsentanzen des Freistaates Bayern in Asien: Bayerische
Repräsentanzen knüpfen Kontakte zu wichtigen Stellen und helfen Verbindungen zu Ansprechpartnern bei Behörden und Unternehmen herzustellen.
State of Bavaria - Korea Office
Mr Jong-Dae Park
12th floor, Nae Wie Building; 6, 2-ka, Eulji-ro, Chung-ku; Seoul 100-192, Korea
Tel: +82-2-778-1263; Fax: +82-2-778-1269 Up
ECONOMY REPORT - KOREA
www.apecsec.org.sg/member/memberecreport/korea.html
REAL GROSS DOMESTIC PRODUCT
Real GDP grew by 13 percent year-on-year in the fourth quarter of 1999, bringing
the growth rate for the whole year to 10.7 percent. This was the highest real GDP
growth rate since 1987. Looking at the GDP growth in terms of economic activity,
agriculture, forestry, and fishing production increased by 2.7 percent year-on-year
in the fourth quarter of 1999. GDP growth in terms of expenditure had private
consumption registering a 10.3 percent increase due to higher household spending,
especially on durable goods, such as cars, mobile phones, personal computers, and
furniture.
During the second quarter of 2000, GDP growth was slightly down, at 9.6 percent
compared with the previous quarter. However, it is projected that real GDP will
grow by 8.5 percent with a trade surplus of 10 billion won this year. Recovery in
domestic consumption and booming exports along with inventory build-up are
behind the optimistic projection for GDP growth.
INFLATION
In September, consumer prices rose by 1.5 percent, and producer prices also rose,
by 0.6 percent. The prices of agriculture, livestock, and marine products showed
high increases in September due to typhoons. Petroleum, chemical and plastic
products led the increase in industrial product prices due to the rise in international
crude oil prices. Housing prices in February continued to rise following the trend of
the previous month, reflecting seasonal factors.
Core inflation, which is calculated by removing the prices of petroleum fractions and
agricultural products except cereals from the consumer price index (CPI), rose by
0.7 percent in September, which was the highest increase since the 1.0 percent
recorded in March 1998.
High oil prices, combined with the speedy economic recovery and wage hike
demands by unions will further add to the inflationary pressure. The central bank
plans to keep inflation within the 1.5 percent to 3.5 percent range in 2000.
EMPLOYMENT
In August 2000, the population over the age of 15 increased by 1.0 percent (or
374,000 persons) to 36,195,000 persons, and the economically active population
increased by 1.4 percent (or 304,000 persons) to 22,071,000 persons compared to
the same month last year. The number of jobless fell to 0.82 million from 1.24
million a year earlier. The unemployment rate fell to 3.7 percent, slightly higher
than the previous month’s level.
The unemployment rate is expected to moderate in the coming months, as the
demand for consumer goods and a pick-up in construction activity continue in line
with the sustained economic recovery. However, the structure of new employment
is different from that of the previous period, with more and more people working as
temporary employees, and being employed for fewer hours.
TRADE BALANCE
Imports, on a customs clearance basis, did not change during September from the
previous month’s level of US$13.4 billion. Meanwhile, exports by Korean companies
amounted to US$15 billion. As a result, the trade surplus was US$1.6 billion, which
is slightly larger than the US$1.5 billion of the previous month.
In terms of commodity groups in July, the high growth rates continued for exports
of information and communication equipment (102.7 percent), passenger cars (5.3
percent), and chemicals and chemical products (24.6 percent). By export destination
during July, exports to both industrialized economies (29.3 percent) and developing
economies (17.3 percent) increased notably. Meanwhile, imports of raw materials
increased by more than 42.2 percent, as a result of higher oil prices. The increasing
demand for telecommunications and electronics products, including personal
computers, has also added to the import bill by necessitating the increased
importation of foreign-made parts and components. Over the course of the next
few months, it is anticipated that the increase in imports will slow down as a result
of stabilizing oil prices.
TOTAL EXTERNAL LIABILITIES
As of the end of July, Korea’s total external liabilities amounted to US$142.1 billion,
up by US$1.1 billion from the previous month. This increase was attributed to a
greater number of trade credits being linked to economic recovery and the
increased borrowing of domestic branches of foreign banks from their
headquarters. The share of short-term external liabilities to total external liabilities
was 33.6 percent.
Korea’s total external credit in July increased by US$1.2 billion to US$162.8 billion
while total net credit increased by US$0.1 billion from the previous month to
US$20.7 billion.
EXCHANGE RATE
The won gained approximately 3.3 percent in value, year-on-year, against the US
dollar in August. The won broke through the 1,200 won/US$ level in November last
year and this upward trend continued through the first quarter of 2000. The dollar
traded at 1,131 won in January, 1,128 won in February and 1,117 won in March; and
averaged at 1,109 won per dollar in January to August 2000. The rise in the won has
been caused by the huge inflow of foreign investment funds, which amounted to
US$3.5 billion during the first two months of 2000, equal to 65 percent of last year’s
total net inflow.
FISCAL POLICY
The budget deficit in year 2000 is expected to amount to some 2.0 percent of GDP.
To achieve a balanced budget by the year 2003, however, the government will have
to operate on the basis of a tight fiscal policy, and the national budget for next year
will be raised by just 0.6 trillion won from that of this year to a total of 10 trillion
won (US$8.8 billion). This would bring the budget growth rate down to 6 percent, or
1 to 2 percentage points lower than expected. As less income from the sell-off of
state-run enterprises is expected, the government will seek to improve the
efficiency of fiscal expenditures by rearranging its public investment priorities. At
the same time, the government will secure stable revenue sources by implementing
tax measures on illegal and under-reported incomes, and by reducing tax
exemptions where the government deems it necessary.
MONETARY POLICY
The central bank will implement a flexible monetary policy to keep the core inflation
rate within the 1.5 percent to 3.5 percent range this year; interest rates will remain
in single digit territory. For the first quarter of this year, consumer prices and core
inflation rose by 1.5 percent and 0.8 percent, respectively, which was well within
the targeted range. In the financial markets, while overall liquidity has increased
significantly, the concentration of funds at the short-term end of the market has
persisted. Despite ample liquidity, however, the recent uncertainties related to the
ailing investment trust companies (ITCs) remain as latent factors serving to
destabilize the financial markets. Therefore, it is essential to establish a clear-cut
plan for the restructuring of the troubled ITCs as soon as possible. Reflecting the
financial sector circumstances, the Monetary Policy Committee of the Bank of Korea
has decided that the overnight call rate would be maintained near its current level
(5 percent) in May.
MEDIUM-TERM OUTLOOK
After the onset of the financial crisis, Korea suffered a serious economic downturn.
However, the Korean government, on the basis of the IMF program, implemented
drastic reforms to correct the structural weaknesses inherent in its economy. The
economic restructuring was carried out in the corporate, financial and labor sectors
in order to promote transparency, efficiency and flexibility.
Starting 1999, the Korean economy has shown a trend of rapid recovery. The growth
rate, after falling by -5.8 percent in 1998, was up 10.7 percent in 1999 and 9.6
percent in the second quarter of this year. The high growth in the second quarter
can be best explained by robust growth of domestic demand and exports. Corporate
investments shot up by 41.3 percent year-on-year during this period compared with
a 38 percent gain in 1999, due to active investment in machinery, ships, railways,
car and automobiles. Exports of goods and services surged 22.9 percent
year-on-year on strong overseas demand for computers, semiconductors and
communications equipment. Imports of goods and services increased by just 19.8
percent, lower than the 28.3 percent rise recorded in the previous year. Private
consumption rose, by 9.0 percent year-on-year compared with a 10.3 percent gain
for the same period in the previous year, and government expenditures edged up
0.5 percent year-on-year versus a 1.7 percent fall the year before.
The real GDP growth in 2000 is likely to be as high as 8.5 percent, considering the
rapid growth of domestic demand, such as private consumption and equipment
investment. Private consumption is expected to experience a 7.6 percent growth in
2000 in tandem with an increase in real income and an expected decline in
unemployment. Equipment investment, as a percentage of GDP, will rise to the
pre-crisis level as the ongoing and strong investment expansion will continue
through 2000, while construction investment is expected to revert to a positive
growth trend in the second half of 2000 given the conventional time lag between
construction orders and actual investment. The current account surplus is likely to
shrink to approximately US$10 billion in 2000, down from US$25 billion in 1999, in
line with the sharp rise in import demand resulting from the rapid expansion of
domestic demand. The contributions to price stability of the deflationary GDP-gap,
currency appreciation, and relatively stable wage growth are likely to decline in the
future.
KOREA: OVERALL ECONOMIC PERFORMANCE
1992
1993
1994
1995
1996
1997
1998
1999
2000(Preliminary)
GDP and Major Components (% change, year over year, except as noted)
Nominal GDP (billion
US$)
307.9
332.8
380.7
456.5
520.0
476.6
317.7
406.7
511.0
Real GDP (% annual
change)
5.1
5.8
8.6
8.9
6.8
5.0
-5.8
10.7
8.5
Total Consumption
Private Consumption
6.6
5.7
7.6
8.3
7.1
3.5
-9.6
10.3
7.7
Government
Consumption
7.6
3.0
4.2
1.0
8.2
1.5
-0.1
-0.6
1.5
Total Fixed Investment
0.8
5.2
11.8
11.7
7.3
-2.2
-21.1
4.1
12.5
Exports of Goods and
Services
7.0
8.7
17.1
24.0
11.2
21.4
13.3
16.3
18.0
Imports of Goods and
Services
2.1
3.1
22.2
22.0
14.3
3.2
-22.0
28.9
28.0
Fiscal and External Balances (% of GDP)
Budget Balance
-0.7
0.3
0.5
0.4
0.0
0.0
-3.0
-2.7
-2.0
Trade Balance
-0.7
0.6
-0.8
-1.0
-2.9
-0.7
12.8
5.9
2.0
Current Account
Balance
-1.5
0.1
-1.2
-1.9
-4.4
-1.7
12.5
6.1
2.1
Capital Account Balance
2.1
0.8
2.7
3.6
-0.1
-0.1
0.1
-0.1
0.6(to July).
Economic Indicators (% change year over year earlier period, except as
noted)
GDP Deflator (%
change)
6.1
5.1
5.5
5.6
3.9
3.2
5.0
-1.6
0.6
CPI (% change)
1990=100
6.2
4.8
6.2
4.5
5.0
4.4
7.5
0.8
2.7
M2 (% change)
18.4
18.6
15.6
15.5
16.2
19.2
19.0
27.9
15.1
Yield on CD (91 days %
per annum)
16.4
12.9
13.2
14.1
13.5
18.6
7.7
6.8
7.2 (avg. Jan.-July)
Exchange Rate (Ann.
Ave. W/US$)
788.4
808.1
788.7
774.7
804.5
951.3
1401.4
1188.6
1109 (avg.
Jan.-Aug.)
Unemployment Rate (%)
2.4
2.8
2.4
2.0
2.0
2.6
6.8
6.3
4.5
Population (millions)
43.7
44.2
44.6
45.1
45.5
46.0
46.4
47.3
47.7
Source: Bank of Korea, National Statistical Office, Ministry of Finance and Economy,Wharton Econometric
Forecasting Associates - Asia Economic Outlook
FORECASTING SUMMARY (percent change from previous year)
2000
2001
2002
Official1)
IMF2)
Link
ADB3)
OECD4)
Official
IMF
Link
ADB
OECD
Official
IMF
Link
ADB
OECD
Real
GDP
7.2
8.5
7.5
4.3
Real
Exports
9.6
6.0
7.5
Real
Imports
16.7
18.0
13.0
CPI
3.1
3.2
2.3
1) -as of 25 February 2000
2) -as of 23 August 2000
3) -as of 26 April 2000
4) -as of June 1999
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