Vol. 29 | No. 1
Republic of Korea
Economic Bulletin The Green Book : Current Economic Trends Overview 1. Global economy
3 4
2. Private consumption
8
3. Facility investment
12
4. Construction investment
14
5. Exports and imports (customs clearance basis)
16
6. Industrial activity
18
7. Service sector activity
20
8. Employment
22
9. Financial markets
24
9.1 9.2 9.3 9.4
Stock market Exchange rate Bond market Money supply & money market
10. Balance of payments
28
11. Prices and international commodity prices
30
11.1 Prices 11.2 International oil and commodity prices 12. Real estate market
34
12.1 Housing market 12.2 Land market 13. Composite indexes of business cycle indicators
Policy Issues
38
40
1. Economic Policy Direction for 2007 2. Measures to Boost Corporate Expansion Overseas and Encourage Overseas Direct Investment
49
Economic News Briefing
55
Statistical Appendices
61
The Green Book Current Economic Trends
Overview The Korean economy in 2006 is assessed to have grown in line with potential as initially expected amid the trend of “higher growth in the 1st half and lower in the 2nd.� Private consumption has recovered at a faster pace than income since 2005. However, its growth pace seems to have been adjusted since the second quarter of 2006. Facility investment kept increasing on the back of robust semiconductors while construction investment was sluggish, particularly in building construction in the private sector. Employment was dull due to decreasing hiring in manufacturing. However, more jobs were available in the service sector. Prices stayed at a stable 2 percent range on the support of stabilized agricultural prices. Exports sustained strong growth backed up by overseas demand increase thanks to the robust global economy. The current account kept registering surplus on goods sales surplus driven by export rise. However, the widening services account deficit emerged as uncertainty to the current account surplus trend. As for the quality of growth, however, momentum for domestic demand increase has slightly moderated. Industrial production continued to gain pace led by exports of semiconductors and automobiles, among others. Meantime, service activity has moderated affected by domestic economic conditions such as consumption. Accordingly, the government will focus on macroeconomic and fine-tuning measures to compensate the domestic economy, so as to help sustain stable growth and ease difficulties of ordinary people. The government will expand sector-by-sector growth engines in response to the moderated momentum of domestic demand including consumption and investment. On the same note, the government will closely monitor risks in the real estate, financial and foreign exchange markets and take preemptive measures as and when necessary.
Economic Bulletin
3
1. Global Economy The global economy maintained solid growth, despite moderation of the US economy, on the back of growth in other regions and downward stabilizing trends of international oil prices. Still, interest rate hikes of major economies and the timing may increase volatilities in the global economy and the international financial market.
US The US economy in the third quarter of 2006 posted a 2.0 percent growth (q-o-q, annualized), down from 2.6 percent in the previous quarter due to slowdown in the housing sector. However, some economic indicators including employment have been favorable recently. In specific, services-led jobs growth, expected to be healthy enough to boost private consumption, was easing concerns over growth moderation. Manufacturing, which had been sluggish, started to indicate signs of improvement evidenced by ISM Index1 recovering the 50 mark to record 51.4. Possibilities of further deterioration of construction have been reduced as home sales have reversed course to register increase. Core consumer prices have moderated. However, wage increase of 4.2 percent in December, which hovered way above consumer prices growth, may serve as a concern over inflationary pressures. (Percentage change from previous period) 2005
2006
Annual
Q4
Q1
Q2
Q3
Oct
Nov
Dec
3.2
1.8
5.6
2.6
2.0
-
-
-
Industrial production
3.2
4.7
5.0
6.5
4.0
0.0
0.2
-
Retail sales
7.2
0.5
3.2
0.8
0.9
-0.1
1.0
-
1,981
536
529
346
556
86
154
167
New home sales
6.8
-1.3
-13.3
-1.0
-7.5
-3.8
3.4
-
Core consumer prices (y-o-y, %)
2.2
2.1
2.1
2.5
2.8
2.7
2.6
-
Real GDP
1
New non-farm payroll employment (thousand)
1. Annualized rate
1. A national manufacturing index based on a survey of purchasing executives at roughly 300 industrial companies. The Index signals expansion when the figure is above 50 and contraction when below.
4
January 2007
1-1
US GDP (q-o-q, annualized rate) Source: US Department of Commerce
1-2
US non-farm payroll employment (m-o-m change) Source: US Department of Labor
1-3
US federal funds rate and consumer prices Source: US Federal Reserve Board & Department of Labor
Economic Bulletin
5
China
Fixed asset investment growth during the January-November period slowed down, affected by restraining measures against overheated investment. Still, the Chinese economy is facing liquidity increase stemming from trade surplus, pressure for yuan appreciation, overheated stock market and consumer price inflation pressure. November consumer prices rose 1.9 percent. The People’s Bank of China announced on January 5 an increase of reserve requirements of banks by 0.5 percentage point. Market expects additional measures to reduce liquidity. (Percentage change from same period in previous year) 2005
Real GDP
2006
Annual
Q3
Q4
Q1
Q2
Q3
Oct
Nov
10.2
9.8
9.9
10.3
11.3
10.4
-
-
Fixed asset investment (accumulated)
27.2
27.7
27.2
29.8
31.3
28.2
26.8
26.6
Retail sales
12.9
12.6
12.6
12.8
13.9
13.8
14.3
14.1
M2
17.6
17.9
17.6
18.8
18.4
16.8
17.1
16.8
Japan
Exports and employment remained robust. November indicators suggested a mixed trend. Unemployment recorded 4.0 percent, the lowest in 8 years, while consumption and price indicators were pointing to weakness. As of December 2006, the Bank of Japan opted to keep the overnight call rate target. (Percentage change from previous period) 2005
2006
Annual
Q3
Q4
Q1
Q2
Q3
Oct
Nov
Real GDP
1.9
0.7
0.5
0.7
0.3
0.2
-
-
Mineral production
1.1
-0.5
2.8
0.6
0.9
1.0
1.6
0.7
Retail sales
1.1
-1.5
-0.1
1.7
-0.3
-0.9
-0.2
0.1
Exports (y-o-y, %)
7.0
2.9
3.7
17.6
14.7
15.6
11.5
12.1
Consumer prices (y-o-y, %)
-0.3
-0.3
-0.5
-0.1
0.2
0.6
0.4
0.3
Eurozone
The eurozone economy continued the recovery supported by balanced growth of domestic demand and exports. Slovenia became the 13th European state to officially adopt euro in January 2007. Its impact on the eurozone economy is likely to be little due to its relatively small GDP accounting for 0.3 percent of the whole eurozone. (Percentage change from previous period) 2005
2006
Annual
Q3
Q4
Q1
Q2
Q3
Oct
Nov
Real GDP
1.4
0.6
0.4
0.8
1.0
0.5
-
-
Industrial production
1.2
0.9
0.7
1.1
1.3
0.8
-0.1
-
Retail sales
1.3
0.6
0.4
0.2
0.5
0.6
0.1
0.5
Exports (y-o-y, %)
7.8
10.1
9.8
15.8
9.3
7.8
16.8
-
6
January 2007
1-4
China’s GDP and fixed asset investment Source: National Bureau of Statistics of China
1-5
Japan's GDP growth Source: Cabinet Office & Ministry of Economy, Trade and Industry, Japan
1-6
Eurozone GDP growth and industrial production Source: Eurostat
Economic Bulletin
7
2. Private consumption Private consumption in the third quarter rose 4.0 percent from a year earlier (preliminary GDP) driven by increased consumption of durable goods. It gained 0.6 percent from the previous quarter.
Private consumption (y-o-y, %): 4.0 (Q3 2005) � 4.2 (Q4) � 4.8 (Q1 2006) � 4.4 (Q2) � 4.0 (Q3) (SA*, q-o-q, %): 1.0 (Q3 2005) � 1.1 (Q4) � 1.3 (Q1 2006) � 0.9 (Q2) � 0.6 (Q3) * SA: seasonally adjusted
Consumer goods sales in November increased 4.1 percent on-year, led by home appliances, computers and clothing. However, the growth was under slight adjustment compared with that in the first half. (Percentage change from same period in previous year) 2005
2006
Q3
Nov
Q4
Annual
Consumer goods sales
4.4
6.8
6.8
(Seasonally adjusted)2
2.1
2.9
2.2
- Durable goods
5.9
10.0
9.5
3
�Automobiles - Semi-durable goods
4
- Non-durable goods5
Q1
Q2
Q3
Sep
Oct1
Nov1
3.9
5.0
5.5
-
-1.3
2.3
2.2
4.7
4.6
4.1
-1.1
-0.5
1.4
1.2
7.5
5.9
10.8
8.9
10.1
23.2
6.9
8.6
19.7
18.5
9.5
22.6
8.1
4.2
38.0
3.5
1.4
7.9
8.0
11.7
7.9
7.4
6.8
2.9
4.5
0.0
6.7
1.3
4.5
3.8
1.3
1.2
3.0
-1.8
-3.2
6.2
0.2
1. Preliminary 2. Percentage change from previous period 3. Durable goods (25.4%): Automobiles, electronic appliances, furniture, telecommunications devices, etc. 4. Semi-durable goods (24.0%): Clothing, footwear, etc. 5. Non-durable goods (50.5%): Food, medicine, cosmetics, fuel, tobaccos, etc.
Department store sales reversed course to post a positive growth on the back of sales increase in home appliances and clothing. Meantime, large discount store sales in November contracted affected by avian influenza. (Percentage change from same period in previous year) 2005 Nov
Q4
Annual
Q1
Q2
Q3
Sep
Oct1
Nov1
- Department stores
3.9
2.4
8.2
3.1
7.9
5.6
0.0
0.4
-1.9
1.9
- Large discount stores
7.2
9.6
11.6
8.3
6.4
9.0
5.4
-3.5
16.1
8.4
- Other retail stores
-1.0
0.7
0.1
-0.1
-3.0
-0.2
-0.9
-0.6
0.4
0.3
1. Preliminary
8
2006
Q3
January 2007
2-1
Private consumption Source: The Bank of Korea (national accounts)
2-2
Consumer goods sales Source: Korea National Statistical Office (industrial activity trend)
2-3
Consumer goods sales by type Source: Korea National Statistical Office (industrial activity trend)
Economic Bulletin
9
Preliminary consumption indicators in December pointed to overall robustness. The value of credit card use and department store sales expanded. Discount store sales reversed to an increase backed by Christmas holiday sales. Value of credit card use (y-o-y, %) 15.7 (Aug 2006) � 20.8 (Sep) � 8.0 (Oct) � 13.5 (Nov) � 10.0 (Dec) Source: The Credit Finance Association
Department store sales (y-o-y, %) -2.7 (Aug 2006) � 2.6 (Sep) � 0.2 (Oct) � 4.4 (Nov) � 2.0 (Dec)
Discount store sales (y-o-y, %) 6.2 (Aug 2006) � -9.9 (Sep) � 10.1 (Oct) � -0.7 (Nov) � 0.5 (Dec) Source: Ministry of Commerce, Industry and Energy Ministry of Finance and Economy (December 2006, monitoring results on current sales volume basis)
Domestic sales of home-manufactured automobiles in December 2006 fell year-on-year due to the high comparison base set in the same month in 2005 driven by the excise tax cut. However, unit-based sales posted a monthly record high in December. Domestic sales of home-manufactured automobiles (thousand units): 90 (Aug 2006) � 115 (Sep) � 98 (Oct) � 105 (Nov) � 122 (Dec) (y-o-y, %): -0.8 (Aug 2006) � 40.3 (Sep) � 1.2 (Oct) � -3.9 (Nov) � -4.4 (Dec)
Consumer expectations index weakened from the previous month affected by the falling exchange rate and a slight increase in oil prices.
Consumer expectations index (base=100) 103.4 (Mar 2006) � 100.6 (Apr) � 98.0 (May) � 97.4 (Jun) � 94.3 (Jul) � 93.7 (Aug) � 94.8 (Sep) � 93.9 (Oct) � 95.2 (Nov) � 93.7 (Dec) Source: Korea National Statistical Office
Sustainable trend growth of private consumption is likely to be affected by income and employment conditions. Although the real GNI in the third quarter of 2006 slightly expanded, it hovered well below the GDP due to the deteriorating terms of trade. On the other hand, employment conditions such as the number of new employees on payrolls have not improved as much, likely to restrain increase of private consumption.
Income and employment indicators (Growth rate, %) 2005 2002
2003
2004
Real GNI
7.0
1.9
Real household income (urban workers)
3.6
Changes in number of employed (y-o-y, thousand)
597
10
January 2007
2006
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
3.9
0.4
0.1
0.3
1.2
1.3
2.1
2.2
-
1.7
2.2
1.9
1.6
0.6
2.3
2.3
4.0
0.8
-
-30
418
143
382
379
292
331
283
288
278
2-4
Department store and discount store sales (current value) Source: Ministry of Commerce, Industry and Energy (monthly retail sales)
2-5
Domestic automobile sales Source: Korea Automobile Manufacturers Association (monthly automobile industry trend)
2-6
Consumer expectations index and present situation index Source: Korea National Statistical Office (monthly consumer survey index)
Economic Bulletin
11
3. Facility investment Facility investment in the third quarter of 2006 (preliminary GDP) increased 9.9 percent from the previous quarter, led by bolstered machinery investment and rebounding investment in transportation equipment. It expanded 3.5 percent from the same period of previous year. (Percentage change from same period in previous year) 2005
Facility investment
2
(Seasonally adjusted)3 - Machinery - Transportation equipment 1. Preliminary
2. National accounts
20061
1
Q1
Q2
Q3
Q4
Annual
Q1
Q2
Q3
2.9
2.7
4.3
10.2
5.1
6.9
7.4
9.9
2.3
2.4
0.8
4.2
-
-0.4
2.5
3.5
7.2
6.0
4.7
9.3
6.8
3.2
9.7
11.9
-14.4
-10.5
2.4
15.1
-2.7
25.7
-3.6
0.2
3. Percentage change from previous period
Facility investment in November (estimated index) increased 5.3 percent year-on-year helped by strong investment in computers and special industrial machinery. Domestic machinery shipments surged 11.3 percent on-year as well. Leading indicators in machinery orders maintained robustness. However, the growth has slightly moderated from the first half. Domestic machinery orders (current value) in November grew 11.5 percent on-year on the back of increase in orders from the private sector, despite sluggishness in orders from the public sector. However, the growth pace has slowed from the first half of the year. (Percentage change from same period in previous year) 2006
2005 Q3
Nov
Q4
Annual
Q1
Q2
Q3
Sep
Oct1
Nov1
1.1
6.6
7.0
3.4
4.3
4.2
10.0
15.3
6.4
5.3
2.4
1.5
1.8
0.6
4.9
4.0
6.1
17.0
4.0
11.3
14.0
11.7
17.5
1.5
11.2
20.8
15.6
34.7
35.1
11.5
- Public
38.9
-28.8
17.1
-3.1
-57.9
43.3
16.1
156.8
160.4
-50.3
- Private
11.7
17.1
17.6
2.0
19.9
19.3
15.5
25.4
16.9
16.5
Estimated facility investment2 - Domestic machinery shipments Domestic machinery orders
1. Preliminary
2. Industrial activity
Machinery imports (%) 16.9 (Aug) � 43.2 (Sep) � 22.5 (Oct) � 13.7 (Nov) � 19.7 (Dec 1~20)
The Business Survey Index (BSI) for facility investment result in the manufacturing sector compiled by the Bank of Korea slightly decreased while BSI for facility investment prospect increased from the previous month.
Business Survey Indexes (base=100) Manufacturing facility investment result Manufacturing facility investment prospect Source: The Bank of Korea
12
January 2007
2006
2007
Aug
Sep
Oct
Nov
Dec
Jan
98 98
98 98
97 98
97 97
96 97
99
3-1
Facility investment by type Source: The Bank of Korea (national accounts)
3-2
Machinery orders and estimated facility investment (3-month average) Source: Korea National Statistical Office (industrial activity trend)
3-3
Machinery imports Source: Korea International Trade Association (KITA)
Economic Bulletin
13
4. Construction investment Construction investment in the third quarter of 2006 (preliminary GDP) was down 0.6 percent year-on-year. However, the pace of negative growth has moderated. In seasonally adjusted terms, it posted an on-quarter increase of 2.9 percent. (Percentage change from same period in previous year) 2005
Construction investment (Seasonally adjusted)
2
3
20061
1
Q1
Q2
Q3
Q4
Annual
Q1
Q2
Q3
-2.2
1.6
0.3
0.9
0.4
1.2
-3.9
-0.6
0.4
1.8
-0.8
0.0
-
0.6
-3.9
2.9
- Building construction
-6.4
0.6
-0.5
1.3
-1.0
2.0
-5.9
-2.1
- Civil engineering works
6.8
3.1
1.5
0.4
2.4
-0.3
-1.2
1.5
1. Preliminary
2. National accounts
3. Percentage change from previous period
Construction completed (current value) in November registered an on-year 7.4 percent growth on the back of robust performance in residential and non-residential construction. (Percentage change from same period in previous year) 2006
2005
Construction completed2
Q3
Nov
Q4
Annual
Q1
Q2
Q3
Sep
Oct1
Nov1
3.8
11.3
6.9
5.7
5.8
1.4
6.4
16.0
7.5
7.4
- Construction
4.6
11.6
5.3
5.1
6.5
0.2
5.3
12.0
4.5
8.6
- Civil engineering works
2.2
10.5
9.8
7.3
4.4
4.1
8.9
23.8
13.8
4.7
Construction orders3
15.8
3.2
-17.9
9.5
-9.7
-14.1
36.2
94.1
1.5
44.2
Building construction permit area
-11.0
-14.3
-8.2
-5.1
13.0
7.4
75.7
54.2
-19.1
26.0
1. Preliminary
2. Industrial activity
3. Current value basis
Construction investment-related leading indicators such as construction orders and building construction permit area surged again in November. They were sluggish in October after temporary briskness in the third quarter. Domestic construction orders in November increased 44.2 percent led by housing sector. The growth of building construction permit area also rose 26.0 percent centering on nonresidential construction. The construction sector is expected to reverse course to post a slight growth from the decreasing trend. However, improvement in large scale is deemed difficult.
14
January 2007
4-1
Construction investment Source: The Bank of Korea (national accounts)
4-2
Construction completed and housing construction Source: Korea National Statistical Office (construction completed) Ministry of Construction and Transportation (housing construction)
4-3
Leading indicators of construction investment Source: Korea National Statistical Office (construction orders) Ministry of Construction and Transportation (building construction permit area)
Economic Bulletin
15
5. Exports and imports (customs clearance basis) Amid strong global demand, exports increased 14.6 percent to US$326 billion in 2006 despite the appreciation of the won, furthering growth from the previous year. By export category (Ministry of Commerce, Industry and Energy, estimated), petroleum products (up 32.9 percent), shipbuilding (up 24.7 percent) and semiconductors (up 23.5 percent) made solid gains. By region, exports to emerging markets such as India (up 21.6 percent) and the Central and South America (up 34.6 percent) posted high growth in the midst of overall increase in exports to most regions. Meantime, December exports remained solid, registering a 13.8 percent rise, despite the shortened days operated. (US$ billion) 2005
Exports (y-o-y, %)
2006
Oct
Nov
Dec
Jan-Dec
Oct
Nov
Dec
Jan-Dec
25.35
25.85
25.63
284.42
28.05
30.66
29.17
325.99
11.9
11.9
10.5
12.0
10.7
18.7
13.8
14.6
Average daily exports
1.13
1.08
1.05
1.03
1.37
1.28
1.30
1.19
Imports
22.65
23.85
24.19
261.24
25.64
26.76
27.53
309.33
(y-o-y, %) Average daily imports
11.0
17.4
15.4
16.4
13.2
12.2
13.8
18.4
1.01
0.99
0.99
0.95
1.25
1.12
1.22
1.13
Imports surged 18.4 percent to US$309.3 billion in 2006, centering on raw materials such as crude oil. Raw materials imports continued a high growth momentum due to rising oil prices. Capital and consumer goods imports also rose, reflecting the recovery in domestic demand.
Raw materials (%) 2.9 (2002) � 17.7 (2003) � 31.5 (2004) � 20.9 (2005) � 22.9 (Jan 1-Dec 20, 2006)
Capital goods (%) 9.4 (2002) � 18.7 (2003) � 21.2 (2004) � 11.7 (2005) � 11.7 (Jan 1-Dec 20, 2006)
Consumer goods (%) 23.6 (2002) � 12.1 (2003) � 10.5 (2004) � 13.3 (2005) � 20.6 (Jan 1-Dec 20, 2006)
Trade surplus (customs clearance basis) narrowed due to the higher growth in raw materials imports, despite robust exports. (US$ billion) 2005
Trade balance
16
January 2007
2006
Oct
Nov
Dec
Jan-Dec
Oct
Nov
Dec
Jan-Dec
2.70
1.98
1.45
23.18
2.41
3.90
1.65
16.65
5-1
Exports (customs clearance basis) Source: Ministry of Commerce, Industry and Energy (export and import trend)
5-2
Imports (customs clearance basis) Source: Ministry of Commerce, Industry and Energy (export and import trend)
5-3
Trade balance Source: Ministry of Commerce, Industry and Energy (export and import trend)
Economic Bulletin
17
6. Industrial activity Industrial production in November moderated to 6.3 percent growth year-on-year affected by the high comparison base of 11.8 percent set in the same month of the previous year. It edged down 1.4 percent from the previous month. However, the accumulated increase rate from January to November maintained a double digit growth of 10.1 percent, hovering way above the 5.7 percent growth from a year earlier. Robust semiconductors exports drove the industrial production. Semiconductors production surged 22.4 percent. The manufacturing operation ratio stood at 82.4 percent, up 0.9 percentage point from the previous month. Domestic shipment reversed course to post a positive growth of 3.5 percent. Shipment growth for exports maintained trend growth of 5.2 percent. Inventory grew 7.6 percent, maintaining a similar growth rate from a month earlier. Inventory circulation in November indicated a similar inventory increase with the previous month. However, inventory level edged up and down as shipment slightly increased from a month earlier. (Percentage change from same period in previous year) 2005 Q2 Industrial production index
2006
Q3
Nov
Annual
Q1
Q2
Q31
Nov1
3.5
7.1
11.8
6.3
12.0
10.9
10.6
6.3
12.1
43.3
33.7
24.8
39.8
42.0
32.6
22.4
11.1
13.5
-12.2
8.4
15.4
8.4
7.3
6.1
0.0
3.2
2.8
-
3.1
-0.4
1.1
-1.4
Average operation ratio (%)
79.6
79.9
82.1
79.8
82.0
80.5
80.5
82.4
Shipment
3.5
6.4
9.8
5.6
9.1
8.4
8.5
4.2
- Domestic demand
1.0
4.2
6.6
2.3
6.7
4.7
3.4
3.5
- Exports
7.3
9.5
14.2
10.3
12.4
13.7
15.4
5.2
8.9
5.8
3.0
2.4
3.7
7.2
6.8
7.6
- Semiconductors - Automobiles (Seasonally adjusted)
2
Total producer inventory 1. Preliminary 2. Percentage change from previous period
December industrial production may continue to moderate due to the reduced days operated by two and the high comparison base of 11.3 percent set in the same month in 2005. However, growth is likely to continue given the performance of leading indicators.
18
January 2007
6-1
Industrial production Source: Korea National Statistical Office (industrial activity trend)
6-2
Average manufacturing operation ratio Source: Korea National Statistical Office (industrial activity trend)
6-3
Inventory Source: Korea National Statistical Office (industrial activity trend)
Economic Bulletin
19
7. Service sector activity Service activity in November was up on-year 5.2 percent, approaching the trend growth recorded before October 2006. October service activity had slowed to 3.3 percent from the trend growth. In seasonally adjusted terms, November service activity increased 1.3 percent from the previous month. All eleven business categories of the service sector expanded output in November, with wholesale and retail sales, real estate and rental services, and financial and insurance services leading the growth. Especially, real estate services accelerated to post a 15.0 percent growth in November from 6.6 percent in October. The rise was more attributable to brokerage commission increase fueled by rising real estate prices than to a gain in real estate transactions. Nationwide real estate prices grew 11.2 percent in November up from 7.6 percent in October, while the prices in Seoul jumped 20.4 percent accelerating from a 13.6 percent increase in the previous month. (Percentage change from same period in previous year) 2006
2005
Weight 100.0
6.1
3.6
6.1
5.3
4.3
6.4
3.3
5.2
Contri-2 bution -
(Seasonally adjusted)3
-
1.0
-
1.3
0.7
0.5
0.5
-0.3
1.3
-
- Wholesale & retail
27.6
4.4
1.9
3.3
3.8
4.0
7.8
2.6
4.1
1.13
- Hotels & restaurants
7.7
1.1
0.3
3.9
2.4
2.4
4.5
-4.2
0.6
0.05
- Transportation
8.8
8.3
4.2
6.4
6.3
5.9
6.8
4.4
6.8
0.60
- Communication services
5.8
4.6
4.1
2.3
2.9
3.2
4.8
1.0
4.7
0.27
- Financial & insurance services
17.6
13.1
7.3
13.2
9.1
4.9
6.7
4.6
6.1
1.07
- Real estate & renting
5.4
10.7
8.5
10.5
8.4
7.4
9.8
8.4
15.3
0.83
- Business services
8.5
4.7
2.8
5.8
6.2
6.2
7.5
5.4
5.6
0.48
- Educational services
8.6
-1.8
0.7
1.3
2.2
1.3
0.4
7.4
2.8
0.24
- Healthcare & social welfare services
4.0
10.7
7.3
11.2
8.1
11.9
9.6
6.1
8.5
0.34
- Entertainment, cultural and sports services
3.5
4.7
3.0
4.9
2.9
-0.7
4.1
-2.3
2.3
0.08
- Other public & personal services
2.6
3.7
1.9
4.7
4.1
3.9
5.0
-1.6
2.7
0.07
Service industry activity index
Nov
Annual
Q1
Q2
Q3
Sep
Oct1
Nov1
1. Preliminary 2. Contribution to November growth (%p) 3. Percentage change from previous period
Service activity is expected to have stayed on the upward track in December. However, it is uncertain that the sector will sustain trend growth. Working days decreased two days year-on-year while there has been a lull in real estate transactions in December. Accordingly, December service activity may have moderated.
20
January 2007
7-1
Service industry Source: Korea National Statistical Office (service industry activity trend)
7-2
Wholesale and retail sales Source: Korea National Statistical Office (service industry activity trend)
Nov 2006 service industry by business
serv ices Hea l t h serv care ices & s ocia l we lfar e Ente spo rtainm rts s en ervi t, cu ces ltura l& Oth & p er pub erso lic, nal repa serv ir ices
Edu cati ona l
Com mun icat ion serv ices Fina serv ncial & ices insu ranc e Rea l es tate & re ntin g Bus ines s se rvic es
Tran spo rtat ion
rest aura nts Hot els &
Wh oles ale &
reta il
Source: Korea National Statistical Office (service industry activity trend)
Tota l ind ex
7-3
Economic Bulletin
21
8. Employment The number of workers on the payroll increased 290,000 from a year earlier in December, maintaining the recent trend growth of around 300,000. In 2006, it expanded 295,000 yearon-year. Employment growth in services moderated slightly to register 293,000 in December due to the high comparison base of 415,000 set in the same month of the previous year. Employment growth slowed in wholesale and retail sales, resulting from the distribution industry becoming larger and going on-line. Hiring in manufacturing slipped 67,000 in December sustaining the downward trend. The fall is attributable to the widening gap between manufacturing and the trends of industrial production and exports. The gap is stemming from informatization and labor-saving technological progress. Employment in agriculture, forestry and fisheries reversed course to post a growth of 11,000 while employment growth in construction accelerated to register a 48,000 increase. The expansion was backed up by favorable employment conditions thanks to 7 to 8 degrees Celsius rise of average temperature year-on-year. As for the quality of employment, employment increases were led by wage workers (up 449,000) and full-time workers (up 365,000). However, full-time employment growth has slightly moderated in December. The unemployment rate fell 0.2 percentage point year-on-year to 3.3 percent as employment growth exceeded the growth of economically active population (up 247,000). Youth unemployment remained unchanged from a year earlier at 7.9 percent. (Change from same period in previous year, thousand) 2005
2006
Dec
Q4
Annual
Q1
Q2
Q3
Q4
Oct
Nov
Dec
Annual
205
293
299
331
283
288
293
278
267
290
295
- Agriculture, forestry and fishery
-91
-36
-9
-34
-65
-28
-36
6
-7
11
-31
- Manufacturing
-41
-77
-56
-72
-77
-57
-77
-58
-60
-67
-67
- Construction
-78
-32
-5
34
7
13
-32
23
17
48
21
- Services
415
436
368
403
419
358
436
305
313
293
371
3.5
3.5
3.7
3.9
3.4
3.3
3.2
3.3
3.2
3.3
3.5
Employment growth
Unemployment rate (%)
22
January 2007
8-1
Number of employed and employment growth Source: Korea National Statistical Office (employment trend)
8-2
Share of employed by industry Source: Korea National Statistical Office (employment trend)
8-3
Unemployment rate and number of unemployed Source: Korea National Statistical Office (employment trend)
Economic Bulletin
23
9. Financial markets 9.1 Stock market KOSPI rallied from mid December driven by bullish overseas stock markets and expectations on year-end dividend payments. However, KOSPI fell slightly at the end of the month due to uncertainty over the US economy and ex-dividend. The index closed the month at 1,434.46 points, up 2.25 points, or 0.2 percent from a month earlier. The KOSDAQ fell 16.02 points or 2.6 percent from the end of previous month mainly affected by the won’s appreciation and rising oil prices, to close the month at 606.15 points. In December, net buying by foreign investors amounted to 1,012.6 billion won, while net selling by institutional and individual investors recorded 567 billion won and 9.6 billion won respectively. (End-period, point, trillion won) KOSPI
Stock price index Market capitalization
KOSDAQ
2005
Dec 2006
Change1
2005
Dec 2006
Change1
1,379.4
1,434.5
55.1 (4.0%)
701.8
606.2
-95.6 (-13.6%)
655.1
704.6
49.5 (7.6%)
70.9
72.1
1.2 (1.7%)
3.2
2.8
-0.4 (-12.5%)
1.8
1.9
0.1 (5.6%)
Average daily trade value 1. Change from the end of previous year
9.2 Exchange rate The won/dollar exchange rate in December remained nearly unchanged from the end of previous month at the 929 won range as the strong dollar in the global market pushed up the exchange rate whereas increased selling of dollars by domestic exporters around year end dragged down the dollar’s value. In early December, the won/dollar exchange rate fell to a record low of the 913 won range on December 7 as exporters sought to exchange dollars for won after year end settlement by overseas importers. Off-shore selling of dollars also pushed down the exchange rate. Toward the middle and the end of December, the won/dollar exchange rate rose to wrap up the month at 929.8 won. The rise was driven by off-shore selling of Asian currencies affected by the overall strength of the dollar and the Bank of Thailand’s new anti-speculative measures announced on December 19 to rein in rising Baht. (End-period) 2004
2005
2006
Dec
Dec
Sep
Oct
Nov
Dec
Change1
Won/Dollar
1,035.1
1,011.6
946.2
942.3
929.5
929.8
8.8
Yen/Dollar
102.5
117.8
117.9
117.3
116.1
118.7
-0.7
1. Appreciation from the end of previous year (%); the value of Korean won is based on closing price at 3:00 p.m.
24
January 2007
9-1
Stock prices
9-2
Foreign exchange rate (month-end)
9-3
Recent foreign exchange rate
Economic Bulletin
25
9.3 Bond market Bond yields such as Treasury bond yields fell in early December due to the falling US Treasury bond yields and the plunging won/dollar exchange rate. Later in the month, however, the yields bounced back on the back of rebounded won/dollar exchange rate. Lowered expectations over early interest rate cut by the US Federal Reserve Board due to favorable employment indicators also contributed to the rise. Bond yields, thereafter, sustained the upward trend with massive sell-off of the Korean Treasury futures by foreign investors, a pick-up in the US Treasury bond yields and the Bank of Korea’s decision to lower the ceiling on aggregate loans to commercial banks. Yields on 91-day CDs, which are short-term interest rates, rose substantially compared to the previous month. (End-period) 2005
2006
Jun
Sep
Dec
Aug
Sep
Oct
Nov
Dec
Change1
Call rate (1 day)
3.30
3.28
3.76
4.48
4.48
4.48
4.49
4.60
84
CD (91 days)
3.53
3.93
4.09
4.59
4.58
4.58
4.67
4.86
77
Treasury bonds (3 yr)
4.02
4.60
5.08
4.57
4.71
4.71
4.82
4.92
-16
Corporate bonds (3 yr)
4.41
5.00
5.52
4.89
5.01
5.01
5.16
5.29
-23
Treasury bonds (5 yr)
4.25
4.83
5.36
4.61
4.79
4.79
4.88
5.00
-36
1. Basis point change from end December 2005
9.4 Money supply & money market M2 growth in November continued to expand driven by the increase of private sector credit centering on bank loans. M1 growth recorded around 9 percent as corporate MMF has been excluded from M1 from November 2005 with the introduction of a system on November 21, 2005, with which corporate MMF is redeemable on and after the next business day. (Percentage change from same period in previous year, average) 2005
2006
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Oct
Nov1
M12
8.1
9.9
13.5
2.6
-0.6
-2.8
-5.5
-1.9
Around 9
M2
6.5
7.1
7.4
6.7
7.0
7.2
8.1
10.1
Around 11
3
6.7
6.8
7.3
7.1
7.2
7.4
7.5
8.8
Mid 9
Lf
4
1. Estimates 2. Excludes corporate MMF as it is redeemable on and after the next business day following the transaction date from November 2005. 3. Liquidity aggregates of financial institutions (mostly identical with M3) 4. Preliminary
In November, bank deposits turned to a positive growth backed up by a rebound in instant access accounts, which had plunged in the previous month due to bonus and corporate tax payments. Asset management company (AMC) receipts decelerated growth from the previous month in November as money market funds (MMFs) decreased due mainly to presale contracts for new apartments in the Pangyo new town and money withdrawal by some commercial banks to expand their lending. (Monthly change, end-period, trillion won) 2005
2006
Nov
Dec
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Bank deposits
1.7
5.4
6.3
2.3
2.1
6.2
10.9
-7.2
4.3
13.6
-7.3
3.7
AMC receipts
3.1
2.1
6.2
6.9
1.3
9.9
-11.7
0.3
-1.8
4.0
5.8
4.7
26
January 2007
9-4
Interest rates Source: The Bank of Korea
9-5
Total money supply Source: The Bank of Korea
9-6
Share of deposits by financial sector (M3 as of year-end) Source: The Bank of Korea * Retail finance: Mutual savings bank & National Credit Union Federation of Korea, Others: Investment banks, post office savings, etc.
Economic Bulletin
27
10. Balance of payments The current account surplus in November amounted to a monthly record high of US$4.24 billion. The accumulated surpluses for the first eleven months of the year registered US$5.95 billion. The goods account surplus significantly widened to US$5.71 billion from a month earlier as the export-import gap on customs clearance basis expanded from US$2.41 billion in October to US$3.9 billion in November. The adjustment of time difference between customs clearance and the hand-over of exported goods such as ships (US$0.68 million) also served to increase surplus. The service account deficit widened to US$1.43 billion from the previous month as payments for overseas travel expenses increased. The travel account deficit posted US$1.1 billion due to the increased payments of overseas travel and education/training expenses while the transportation account surplus posted a mere US$0.21 billion due to increased payment of ocean freight expenses. Travel balance (US$ billion) -0.78 (Sep 2005) � -0.60 (Oct) � -0.71 (Nov); -1.16(Sep 2005) � -0.96 (Oct) � -1.10 (Nov)
Transportation balance (US$ billion) 0.26 (Sep 2005) � 0.49 (Oct) � 0.35 (Nov); 0.30 (Sep 2006) � 0.35 (Oct) � 0.21 (Nov)
The income account surplus stood at US$0.24 billion, narrowed by US$0.22 billion from October as overseas dividend and interest payments increased. The seasonally adjusted current account recorded a US$2.98 billion surplus in November while that in the first eleven months of the year posted a US$4.98 billion surplus. (US$ billion) 2005
2006
Sep
Oct
Nov
Jan-Nov
Sep
Oct
Nov
Jan-Nov
Current account
1.49
2.83
2.06
14.70
1.41
1.76
4.24
5.95
(Seasonally adjusted)
1.11
1.45
1.54
15.66
0.43
0.76
2.98
4.98
- Goods balance
2.71
3.48
3.19
31.02
3.17
2.69
5.71
27.26
- Service balance
-1.07
-0.61
-0.88
-12.22
-1.55
-1.19
-1.43
-16.88
- Income balance
0.07
0.06
-0.08
-1.90
0.25
0.46
0.24
-0.82
The capital and financial account balance saw a net inflow of US$0.44 billion in November on the back of the withdrawal of short-term external loans extended by domestic deposit banks. Capital & financial account balance (US$ billion) -0.71 (Sep 2005) � -1.94 (Oct) � 0.16 (Nov); 1.81 (Sep 2006) � -2.26 (Oct) � 0.44 (Nov)
As for December, the current account surplus is expected to narrow from November due to a decrease in the goods account surplus. For 2006 as a whole, it is estimated to post a surplus of around US$6.0 billion.
28
January 2007
10-1 Current account balance Source: The Bank of Korea (balance of payments trend)
10-2 Travel balance Source: The Bank of Korea (balance of payments trend)
10-3 Capital & financial account balance Source: The Bank of Korea (balance of payments trend)
Economic Bulletin
29
11. Prices and international commodity prices 11.1 Prices Consumer prices were up 2.1 percent year-on-year in December while posting 2.2 percent growth for the whole year of 2006, the most stable annual inflation since 1999 when the prices rose 0.8 percent.
Consumer price inflation 2006
2005 Dec
Aug
Sep
Oct
Nov
Dec
Month-on-Month (%)
0.3
0.6
0.3
-0.5
-0.5
0.3
Year-on-Year (%)
2.6
2.7
2.5
2.2
2.1
2.1
Prices of agricultural, livestock and fishery products stabilized in December led by vegetables while prices of industrial products such as oil products and personal service fees were stable compared with the previous years. Public utility charges recorded a relatively sharp increase due to a rise in the transportation fares including intercity bus and train fares. It was mainly attributable to rising oil prices.
Consumer price inflation in major sectors Total
(Percentage change from same period in previous year)
Agricultural, livestock & fishery products
Industrial products
Oil products
Housing rents
Public utility
Personal services
Dec 2006 (Contribution ratio, %p)
2.1
1.4 (0.12)
0.7 (0.21)
-1.9 (-0.11)
1.3 (0.13)
3.9 (0.63)
2.9 (0.99)
Dec average 2001-2005
3.2
6.0
2.5
4.7
2.7
2.3
3.8
Consumer price increases of major items in Dec 2006 (y-o-y, %) Intercity bus fares: 10.7; train fares: 9.5; childcare service charge: 6.0; tuition fees for college prep institutes: 8.3
Consumer price decreases of major items in Dec 2006 (y-o-y, %) Radish: -49.7; Chinese cabbage: -49.0; camera: -34.7; computer main body: -26.9
Year-on-year core inflation was up 2.1 percent in December to record an annual average rate of 1.8 percent in 2006. Consumer prices for basic necessities rose 2.6 percent in December from a year earlier, standing at a 3.1 percent increase on average for 2006. (Percentage change from same period in previous year) 2005
2006
Oct
Nov
Dec
Annual
Oct
Nov
Dec
Annual
Core inflation
1.7
1.9
1.8
2.3
2.0
2.1
2.1
1.8
Consumer prices for basic necessities
3.3
3.5
3.9
4.1
2.7
2.6
2.6
3.1
Consumer prices in January 2007 are expected to maintain the stable 2 percent level yearon-year, driven by the decrease of city gas fees albeit the increase in the prices of agricultural, livestock and fishery products including vegetables.
30
January 2007
11-1 Prices Source: Korea National Statistical Office (consumer prices, core inflation) & The Bank of Korea (producer prices)
11-2 Consumer price inflation Source: Korea National Statistical Office (consumer price trend)
11-3 Contribution to consumer price inflation Source: Korea National Statistical Office (consumer price trend)
Economic Bulletin
31
11.2. International oil and commodity prices International oil prices rose from a month earlier in December affected by the following factors: OPEC’s decision to cut output further, rising demand for heating oil during winter season and the UN sanctions resolution against Iran. International oil prices in January 2007 are likely to be mainly influenced by the weather conditions and the developments concerning Iran’s nuclear program. (US$/barrel, period average) 2004
2005
2006
Annual
Annual
Annual
Sep
Oct
Nov
Dec
Dubai crude
33.6
49.4
61.6
59.9
56.6
56.8
58.7
Brent crude
38.2
54.3
65.1
61.4
57.5
58.8
62.6
WTI crude
41.4
56.5
66.0
63.8
58.8
59.1
62.0
Record high oil prices in 2006 (spot prices, US$/barrel) Dubai crude: 72.2 (Aug 8)
Brent crude: 78.7 (Aug 8)
WTI crude: 77.0 (Aug 7)
Gasoline price remained unchanged from a month earlier while diesel price fell, despite the increase in international oil prices. (Won/liter, period average)
Gasoline prices Diesel prices
2004
2005
2006
Annual
Annual
Annual
Sep
Oct
Nov
Dec
1,295
1,365
1,543
1,506
1,441
1,415
1,415
908
1,080
1,295
1,272
1,209
1,187
1,182
Source: Korea National Oil Corporation
International commodity prices in December were up from the previous month as prices of non-ferrous metals such as nickel and tartar, and those of agricultural products such as corn and raw cotton all climbed. While prices of electrolytic copper and zinc slid, prices of nickel, lead, tartar and aluminum rose month-on-month affected by strong demand and reduced output. Prices of soybean and wheat remained stable thanks to favorable weather conditions. However, corn and raw cotton prices climbed due to increase in the purchase of investment funds while coffee prices rose as well on concerns over the possible supply disruption. Price increases in Dec (monthly average, m-o-m, %) Tartar: 10.1; nickel: 7.8; corn: 2.7; raw cotton: 8.1; coffee: 7.5
Price decreases in Dec (monthly average, m-o-m, %) Electrolytic copper: -5.1; zinc: -0.4; soybean: -0.1; raw sugar: -0.2
Reuters index*
(Period average)
2004
2005
Annual
Annual
Annual
Sep
Oct
Nov
Dec
1,618
1,680
2,019
2,035
2,086
2,153
2,182
* A weighted average index of 17 major commodities
32
January 2007
2006
11-4 International oil prices Source: Korea National Oil Corporation
11-5 International oil prices (Dubai crude) and import prices Source: Korea National Oil Corporation & Korea Customs Service
11-6 International commodity prices Source: Bloomberg (CRB) & The Bank of Korea (Reuters index) * CRB demonstrates futures price index of 21 commodities listed on the US Commodity Transaction Market, including beans and other crops, crude oil and jewelry.
Economic Bulletin
33
12. Real estate market 12.1 Housing market Apartment prices growth nationwide slowed from the previous month in December.
Apartment sales prices 2003
2004
(Percentage change from previous period) 2005
Annual Annual Annual
2006 Jul
Aug
Sep
Oct
Nov
Dec
Dec 41 Dec 111 Dec 181 Dec 251
Nationwide
9.6
-0.6
5.9
0.2
0.2
0.4
1.5
3.8
2.1
0.5
0.5
0.3
0.2
Seoul
10.2
-1.0
9.1
0.3
0.3
0.6
2.2
6.2
3.7
0.7
0.7
0.4
0.3
14.3
-1.3
13.5
0.3
0.2
0.7
2.5
6.5
2.4
0.4
0.4
0.3
0.2
-
-3.7
7.6
0.5
0.5
1.0
3.3
8.2
3.6
0.8
0.9
0.6
0.4
Gangnam
2
Gyeonggi
1. Weekly trends 2. Upscale area of southern Seoul Source: Kookmin Bank
As for apartment rental prices, its upward trend has slowed.
Nationwide apartment rental prices 2003
2004
(Percentage change from previous period)
2005
Annual Annual Annual
2006 Jul
Aug
Sep
Oct
Nov
Dec
Dec 41 Dec 111 Dec 181 Dec 251
Nationwide
-0.4
-2.7
5.7
0.1
0.2
0.8
1.2
1.2
0.6
0.1
0.1
0.1
0.1
Seoul
-3.2
-4.4
6.2
0.2
0.4
1.2
1.7
1.7
0.6
0.1
0.1
0.0
0.1
Gangnam2
-2.3
-5.2
8.6
0.1
0.2
1.2
1.5
1.6
0.5
0.1
0.1
0.0
0.1
Gyeonggi
-
-5.5
10.6
0.2
0.4
1.5
2.1
2.1
1.0
0.2
0.2
0.2
0.1
1. Weekly trends 2. Upscale area of southern Seoul Source: Kookmin Bank
Apartment sales transactions in November continued to rise from the previous month.
Apartment sales transactions 2004
2005
Annual Annual 64
34
(Monthly average, thousand)
79
January 2007
2006
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
71
104
66
86
107
89
89
81
68
60
100
110
152
12-1 Real estate prices Source: Kookmin Bank (national housing price trend)
12-2 Weekly apartment sales prices and monthly transaction volume Source: Kookmin Bank (weekly APT price trend) & Korea Land Corporation (monthly land trade trend)
12-3 Apartment prices by region Source: Kookmin Bank (national housing price trend)
Economic Bulletin
35
12.2 Land market Nationwide land prices in November were up 0.51 percent from the previous month. Only 57 areas out of 248 cities, counties and districts stayed above the nationwide average while the rest stood at below average.
Land prices by region
(Percentage change from previous period)
2003
2004
Annual Annual Q1
2005
2006
Q2
Q3
Q4
Annual Q1
Q2
Q3
Q4
Q1
Q2
Q3
Oct
Nov
Nationwide
3.43
3.86 1.36
1.09
0.77
0.58
4.98 0.76
1.90
1.13
1.11
1.31
1.41
1.25
0.49
0.51
Seoul
5.23
4.09 2.10
0.95
0.59
0.39
6.56 0.74
2.65
1.44
1.59
1.78
2.37
2.19
0.83
0.86
Gyeonggi
5.12
6.12 1.96
1.74
1.16
1.13
5.69 0.96
2.40
1.41
0.81
1.12
1.29
1.05
0.51
0.51
S. Chungcheong
4.81
11.65 2.40
4.65
3.93
0.25
8.32 2.16
2.52
1.28
2.12
2.77
1.31
0.69
0.22
0.21
Land transactions in November stayed on the upward track driven by increased transactions of residential building sites.
Land sales transactions
(Monthly average, thousand)
2004
2005
Annual Annual Nov
2006 Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Nationwide
218
248
213
319
153
197
261
231
249
211
182
178
236
239
330
Gyeonggi
52
56
48
71
22
45
61
55
66
52
45
46
66
71
102
N. Chungcheong
8
11
10
13
11
8
11
8
9
9
8
7
8
7
10
S. Chungcheong
20
17
12
19
10
13
17
14
15
12
8
8
10
9
12
36
January 2007
12-4 Land and consumer prices since 1970s Source: Korea Land Corporation (land prices) & Korea National Statistical Office (consumer prices)
12-5 Land prices by region Source: Korea Land Corporation (land price trend)
12-6 Land trade volume Source: Korea Land Corporation (land trade trend)
Economic Bulletin
37
13. Composite indexes of business cycle indicators The cyclical indicator of coincident composite index, a barometer of current economic conditions, was up for four consecutive months from August, registering a 0.3 percentage point increase from a month earlier in November. The rise was driven by increases in all components of the index including the industrial production index, the value of construction completed and the domestic shipment index. The leading composite index, which foresees the future economic conditions, rose for three consecutive months in November to post a year-on-year increase of 0.2 percentage point from a month earlier. Major contributors to the growth included improvements in construction orders received, liquidity of financial institutions and the consumer expectation index. The recent trend of the Korean economy is assessed to have not deviated much from the initial forecast. The economy from the first quarter to the third deployed a 5.4 percent growth and is likely to reach an annual growth of 5 percent in 2006. Still, export growth of a few sectors including semiconductors led the industrial output growth while the recent upward trend in consumption and investment has slightly moderated.
2006
Cyclical indicator of coincident composite index (m-o-m, p) Leading composite index
2
(m-o-m, %p) 1. Preliminary 2. y-o-y, %
38
January 2007
Apr
May
Jun
Jul
Aug
Sep1
Oct1
Nov1
100.0
99.9
99.8
99.0
99.1
99.6
100.8
101.1
-0.5
-0.1
-0.1
-0.8
0.1
0.4
1.2
0.3
5.8
5.3
4.8
4.3
3.9
4.1
4.4
4.6
-0.8
-0.5
-0.5
-0.5
-0.4
0.2
0.3
0.2
13-1 Cyclical indicator of coincident composite index Source: Korea National Statistical Office
13-2 Leading composite index Source: Korea National Statistical Office
13-3 Coincident and leading composite indexes Source: Korea National Statistical Office
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39
Policy Issues 1. Economic Policy Direction for 2007 Expanding growth momentum amid economic stability
I. Domestic and external economic conditions in 2007 1. External economic conditions The world economy is projected to continue a strong growth over than the average growth in the past decade. However, it is expected to moderate slightly from 2006.
Consensus forecasts of the world economy (%) 2006
2007
Average growth in past decade
IMF
OECD
IMF
OECD
Global Economy
4.1
5.1
3.2
4.9
2.6
US
3.1
3.4
3.3
2.6
2.4
Eurozone
2.1
2.4
2.6
2.0
2.2
Japan
1.3
2.7
2.8
2.1
2.0
China
9.1
10.0
10.6
10.0
10.3
1. IMF figures are preliminary as of May 2006. 2. OECD figures are exclusively for 30 member states. 3. The world economic growth is calculated by PPP exchange rate.
The US economy is forecasted to contract slightly and expand by a mid 2 percent, a little below its growth potential of around 3 percent. Japan and the eurozone are projected to grow around 2 percent and China around 10 percent, above its potential, which is expected to compensate moderation of the US economy. International oil prices are predicted to stabilize downwardly due to decreasing demand for crude oil. However, given the lack of surplus production capacity of oil producing countries, the high oil price of upper US$50 per barrel (Dubai crude basis) would persist.
Forecasts of oil prices in 2007 (as of December 2006, annual average, US$ billion)
CERA EIA
1
2
CGES
3
1. US Cambridge Energy Research Agency
40
January 2007
Crude
2005
2006
2007
Dubai
49.4
61.2
56.0
WTI
56.5
66.1
65.2
Brent
54.3
65.2
57.7
2. US Energy Information Administration
3. Center for Global Energy Studies
The international financial market will likely experience protracted weak dollar trend in case the gap between the US and other regions in growth and interest rate narrows. The Japanese yen may reverse course to weakness if Japan’s policy rate raise is delayed. The global IT business is predicted to expand at a similar level to 2006 led by semiconductors and displays.
IT business outlook in 2007 (%) 2005
20061
20071
Semiconductors2 (WSTS, Oct 2006)
6.8
8.5
8.6
D-Ram2 (WTST, as of Oct 2006)
-4.7
23.5
10.0
Flash memory2 (WSTS, Oct 2006)
63.9
13.3
16.2
TV LCD (Goldman Sachs, Nov 2006)
133.6
88.8
53.9
Cell phones (Gartner, Nov 2006)
21.7
18.0
13.0
3
3
1. Estimates
2. On sales value basis
3. On production basis
In a nutshell, external conditions in 2007 are forecasted to improve more than 2006 in overall terms on the back of moderating global growth and some downside risks. The downside risks to the world economy include: the possibility of wider moderation of the US growth, the possibility of oil price surge with materialization of geopolitical risks or a supply shock, and the possibility of expanding uncertainties such as foreign exchange volatility in the process of adjusting global imbalances such as the US current account deficit. Nonetheless, if the oil prices stabilize downwardly out of recent surge, it could serve as a positive factor to domestic demand.
2. Domestic economic conditions The Korean economy has achieved growth in line with the initial forecast so far. However, the momentum for domestic demand such as consumption has weakened slightly. Consumption growth has been constrained by slow improvement in real purchasing power due to laggard GNI since 2005 and the increase in household debt repayment. In case international oil prices stabilize downwardly, the GNI growth rate would near that of GDP, supporting consumption recovery from the second half of the year.
Real GNI (%) 2006 2005 Real GNI
0.5
Q1
Q2
Q3
1.3
2.1
2.2
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41
Household disposable income to debt repayment ratio (%) Household disposable income to debt repayment ratio
2003
2004
2005
H1 2006
9.53
8.56
8.34
9.15
Facility investment continues to be robust. However, structural factors such as the absence of new business models have set a limit to expansion. Sluggishness in construction investment prevails affected by building construction in the private sector. On the other hand, exports remain stronger than expected supported by brisk overseas demand. From January to November 2006, exports increased 14.8 percent.
Exports (Customs clearance basis, %) Exports
Q1 2006
Q2
Q3
Oct
Nov
10.6
16.9
16.4
10.7
18.7
Some risks exist in the real estate market and the financial and foreign exchange market. There is a possibility that heated expectations for higher real estate prices may not be curbed due to time lag between now and the time of materialization of promised housing supply. If the herd behavior continues in the financial and foreign exchange markets, a change in economic conditions might link to household default and insolvency of financial institutions. Non-economic factors such as the North Korean nuclear issue and the presidential election may pose as uncertainties to the economy.
42
January 2007
2007 Economic Policy Direction Expanding growth momentum amid economic stability
▲ Manage the economy stably
Expand growth momentum
▲
▲
Manage macroeconomy stably
Create jobs through investment promotion
Stabilize people’s livelihood
Upgrade and make the economic system transparent
Strengthen opening and international cooperation
Reinforce preparing for the future
▲
▲
▲
▲
▲
▲
① Finetune macroeconomic policy to compensate the economy
① Upgrade business environment constantly
① Expand the basis for job security
① Advance the financial market system
① Bolster FTA conclusions
① Make devlopment strategy for Vision 2030
② Manage prices stably
② Boost services competitiveness
② Improve housing welfare
② Improve flexicurity of labor market
② Revitalize inbound and outbound FDIs
② Prepare for low fertility and ageing society
③ Lay the foundation for stable real estate market
③ Expedite SME restructuring and competitiveness
③ Increase financial and tax support for ordinary people
③ Advance the fiscal and tax system
③ Strengthen economic and financial cooperation
③ Secure an advanced energy supply and demand structure
④ Preempt risks in financial and foreign exchange markets
④ Compensate construction investment
④ Substantiate social safety net
④ Create innovationdriven economy
④ Intensify efforts to build a Northeast Asian financial and logistics hub
④ Promote balanced national development
⑤ Expand social investment
⑤ Raise transparency and productivity through IT
⑤ Substantiate inter-Korean economic cooperation
⑤ Improve statistics infrastructure
⑥ Strengthen consumer rights
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43
II. Major policy tasks 1. Managing the macroeconomy stably Operating the macroeconomic policy to compensate the economy
- The government will opt for fiscal frontloading, while encouraging investments of public corporations as planned and identifying new demands for investment. - The government will make efforts to stabilize foreign exchange through more broadbased adjustment of foreign exchange supply and demand. The Bank of Korea, on the other hand, will flexibly operate the interest rate policy taking into account prices and economic conditions.
Laying the foundation for stable prices and real estate market
- The government will minimize the factors driving up public utility charges, continue
Preempting risks of the financial and foreign exchange markets
- The government will strengthen monitoring of household loans and compensation for
pursuing the agricultural, fishery and livestock reserve projects, and promote price stabilization by improving institutions. - The government will speed up housing supply and firmly implement the anti-speculation measures, while improving institutions to reduce the real sale price.
land expropriation to ensure no excessive liquidity, while enhancing financial supervision and actively coping with any risk of insolvency. - Along with strengthened prudence guide for short-term foreign borrowings, institutions will be improved toward reducing the factors leading to foreign borrowings. - A response system will be established to allow constant monitoring and managing of finance-related risks.
2. Creating jobs through investment promotion Upgrading the business environment constantly
- The government will ensure implementation of the tasks enlisted in the “Comprehensive Measures to Improve the Business Environment” of September 28, 2006 as planned and continue to identify additional tasks through consultation with the five economic organizations. - Tax supports will continue including extension of sunset clauses such as temporary investment tax exemption. - Policy on large business groups will include legislation as scheduled and permit of selective enlargement of factories in the Seoul metropolitan area and its vicinity.
Strengthening competitiveness of services and SMEs
- The government will adequately monitor and review the implementation of the tasks set out at the “Comprehensive Measures to Boost Services Competitiveness” of December 14, 2006. Efforts will accompany identifying and fostering new promising business categories with high growth potential. - SME restructuring will be facilitated by supporting business transfer and revitalizing mergers and acquisitions. SME competitiveness will also be promoted by expanding R&D, encouraging win-win cooperation between large businesses and SMEs and improving financial assistance.
44
January 2007
Compensating sluggish construction investment
- Private housing construction will be boosted through early easing of regulations. - The government will proceed with construction of the happiness, company, and innovation towns as planned, while trying to revitalize the public-private partnerships (PPPs) by improving the institutions on BTL (Build-Lease-Transfer). - While faithfully implementing the investment plans of public corporations, the government will work to allow national pension funds to invest in public rental housing.
3. Stabilizing people’s livelihood Establishing the grounds for job and housing security of ordinary people
- The government will upgrade employment assistance by expanding services provided by the Employment Support Center, while substantiating the features of vocational training and youth employment supports. - Grounds for job creation in the social service sector will be fostered, and custom-made supporting measures for traditional markets and small traders will be promoted. - The government will pursue expanded reservation of long term rental housing for those below middle class while extending financial support for key money and housing lease guarantee funds.
Less financial burden and more tax support to ordinary people
- Measures to boost microfinance shall be pursued without hitch which include broadening the business and sales scope of financial institutions providing microcredit services and expanding microfinance services to the poor. - Ordinary people’s financial losses and damages arising from unlawful money lending will be minimized by reshuffling the subject managerial and supervisory systems via consultation amongst lending institutions. - The government will initiate improvements to the credit card service charge rate applied to member shops with a view to alleviating the financial burden of the lower income people. - The government will bolster tax support for wage earners, the disabled and farmers.
Substantiating social safety net and expanding social investment
- The government will improve the basic livelihood guarantee program and the medical insurance payment system. It will also pave the way for introducing a basic old age pension scheme for the low income elderly. - Welfare for the disabled shall be expanded while welfare service delivery system is to be promoted aimed at enhancing people’s sentiment on the welfare services. - Social investment in children, health care and the old age life will be gradually expanded with a view to promoting welfare and securing quality human capital for the future.
4. Upgrading and making the economic system transparent
Advancing the financial market system on a continual basis
- The government will lay the institutional framework in response to the concurrent engagement in multiple financial services and market opening while upgrading the capital market system in Korea. Necessary infrastructure will be established to make the financial system effective. - The government will review the possibility of running a more diversified foreign currency exchange market on top of the won/dollar exchange market. Further efforts will be made
Economic Bulletin
45
to upgrade the forex market infrastructure including expanding trade volume and advancing trade practice. Improving flexicurity of the labor market
- Follow-up measures on the legislation on advancing labor relations will be spearheaded as scheduled. Additional tasks will be identified aimed at enhancing the labor market flexibility. - Measures addressing non-regular workers will be faithfully implemented. Special programs for the labor market stability will be expanded including broader application of social insurance payments and unemployment benefits.
Upgrading the fiscal institutions and the tax system
- The national debt management system will be effectivized while the government accounting and contracting system being advanced. Efforts to make government properties more value-added will be spearheaded. - The government will improve the tax reduction and exemption regime while preparing for a faithful implementation of Earned Income Tax Credit (EITC). Transparency of the tax source and convenience of the taxpayers will be promoted continuously.
Fostering a basis for innovationdriven economy
- The government will expand R&D investment and efficiency. A base for fostering quality human capital will be established through innovation in university education. - The government will fully utilize various IT technologies such as RFID (Radio Frequency Identification), thereby enhancing transparency and productivity in all sectors including public, industrial and welfare sectors.
5. Strengthening opening and international cooperation Expanding multi-track FTA negotiations
- The government will accelerate the Korea-US FTA negotiations and others while boosting
Promoting measures to boost inbound and outbound FDIs
- The government will strengthen efforts to attract foreign investment. The efforts include
the momentum of FTA talks through joint studies and keep monitoring the effects and implementation of the concluded FTAs.
improving the foreign investment attraction system and business and living environments for foreign investors in Korea. Efforts will also be made to enhance international credibility of Korea through IRs. - Measures to boost outbound FDI will be drawn up and implemented with emphasis on streamlining regulations on direct and indirect overseas investment and strengthening information provision.
Reinforcing economic and financial cooperation
- The government will address pending trade issues while enhancing economic cooperation with advanced countries through various dialogue channels. - Mutually beneficial economic cooperation will be strengthened with BRICs. An international finance coordination system will be established through global financial cooperation projects.
46
January 2007
Financial & logistics hub and inter-Korean economic cooperation
- The government will streamline laws and improve institutions to build a financial hub. At the same time, it will earnestly expand the infrastructure and upgrade the logistics system to make Korea a logistics hub. - Institutional base will be reinforced for inter-Korean economic cooperation projects while strategies will be drawn up to form an inter-Korean joint economic community in the long run.
6. Reinforcing preparing for the future Vision 2030
- The government will successfully proceed with Vision 2030 by putting its core tasks on the public agenda in an effort to seek a new national development strategy.
Thoroughly preparing for low fertility and ageing society
- The government will make financial support and improve institutions to create a favorable environment for child birth and rearing. The government will also lay a foundation for facilitating employment of the aged. - Efforts will be made to improve public pension and insurance schemes. The efforts include reform of the national pension service and measures for fiscal stability of national health insurance.
Sustainable energy supply and demand structure
- The government will establish an advanced and highly efficient energy use system while coming up with energy welfare measures including setting minimum energy use standards. - The government will also secure energy resources in a stable manner. To that end, it will develop overseas as well as new and renewable energy resources while disseminating the new energy resources.
Balanced national development
- The government will devise and pursue the 2nd phase of balanced national development strategy while coming up with a comprehensive measure for the development of rural and fishing villages. - Statistics infrastructures will be improved for the areas of real estate and human resources.
III. The Korean economy in 2007 Growth
The Korean economy in 2007 is expected to grow around 4.5 percent, slightly lower than that of 2006. Growth is estimated to be higher in the second half amid the trend of “lower growth in the 1st half and higher in the 2nd.� Private consumption is likely to moderate to register around 4 percent growth given insufficient improvement in employment and household income conditions as well as the low level of household savings rate. Facility investment is projected to continue a solid mid 6 percent growth, considering the favorable leading indicators. Construction investment is expected to reverse its course to post a positive growth, derailing from the decreasing trend of 2006. However, substantial
Economic Bulletin
47
improvement within a short time period is unlikely given the sluggishness in construction orders from the private sector. Exports are estimated to sustain robustness in 2007 as well, albeit slower on-year growth of around 10 percent is expected. Employment
Around 300,000 new jobs are likely to be added in 2007, keeping up with the level of longterm trend. Amid on-going trend slowdown of job creation capacity of the economy, employment conditions in 2007 are expected to be less favorable than the previous year. Still, job creation similar to 2006 is anticipated on the back of projected jobs growth in social services with fiscal support.
Consumer prices
Consumer prices are expected to stabilize at around 2.7 percent. Consumer prices are likely to gain pace from the previous year as the effects of domestic demand recovery appear in time lag. However, the prices are likely to stay within a stable 3 percent range.
Current account balance
It is likely to balance out. The goods account surplus in 2007 is expected to be similar to that of 2006. However, the current account is estimated to balance out given the continuing trend of widening non-goods account deficit led by services.
Overall assessment
The Korean economy in 2007 is expected to perform mostly in line with potential in terms of growth and employment, despite external and domestic uncertainties.
Economic growth rate Employment growth Consumer prices Current account balance
48
January 2007
2006 Performance
2007 Prospect
Around 5 percent
Around 4.5 percent
Around 300,000
Around 300,000
2.2 percent
Around 2.7 percent
Around US$6 billion
Around US $1 billion
2. Measures to Boost Corporate Expansion Overseas and Encourage Overseas Direct Investment The Ministry of Finance and Economy announced on January 15, 2007 the “Measures to Boost Corporate Expansion Overseas and Encourage Overseas Direct Investment.”
I. Purpose The purpose of the new measures is to: - Strengthen investment infrastructure to revitalize corporate expansion overseas by expanding financial support tools, streamlining the regulations concerned and establishing a risk management system; - Increase incentives and upgrade institutions for the expansion of overseas direct investment (ODI) and portfolio investment; and - Adjust the supply of liquidity from overseas by encouraging enhanced control of unnecessary and non-urgent overseas borrowings.
II. Implementation plans 1. Boosting corporate expansion overseas The boosting measures particularly target the three strategic areas: 1) Resources and energy development projects, 2) Overseas infrastructure projects, and 3) Financial industry. Along with this, deregulatory measures will be made for risk sharing and more financial support.
(1) Bolstering government agencies’ support for corporate expansion overseas ( i ) Increased support will be extended to feasibility study on BOT-type infrastructure projects being pursued by developing countries. It is expected to facilitate Korean companies’ participation in the projects. Budget for the Development Studies by Korea International Corporation Agency (KOICA) will be expanded. The earmarked fund (provisional) is 5.94 billion Korean won. The Ministry of Commerce, Industry and Energy (MOCIE) and the Ministry of Construction and Transportation (MOCT) each has a fund of 2.7 billion won and 2.0 billion won for feasibility study, with the open possibility of increasing the budget after due review. MOCIE and MOCT have commissioned the operation of funds to Korea Plant Industry Association and the International Contractors Association of Korea, respectively. (ii) The government will expand tools to reduce risks from companies’ entering overseas markets. By doing so, it will encourage investment in high risk projects including
Economic Bulletin
49
energy and other resources development projects. Korea Export Insurance Corporation (KEIC) will introduce Overseas Business Financing Insurance (OBFI) and Overseas Natural Resources Development Fund Insurance (ONRDFI). OBFI provides protection against losses arising from financial activities of offering loans to overseas subsidiaries of Korean companies. ONRDFI covers losses from overseas investment fund with resources development purpose. Insurance coverage of Foreign Exchange Risk Insurance (FERI) of KEIC has been extended from US$5 billion to US$8 billion in end 2006. As for plant and construction industries, it takes a considerable amount of time from bidding, receiving orders to payment settlement. Given this, companies usually buy the FERI at the time of bidding to hedge foreign exchange risks. The Export-Import Bank of Korea (Korea Eximbank) will establish and operate Overseas Direct Investment (ODI) Early Warning System. Through the system, Korea Eximbank will comprehensively analyze and assess investment environment, trends and sovereign ratings of major investment destinations. It will alert investors of investment risks of the countries with signs of risk. (iii) Financial support from Korea Eximbank will be further expanded. The scope of businesses eligible for Korea Eximbank’s financial support will be enlarged in line with demand for the fund.
Currently eligible businesses
Newly added businesses
Export fund
Exports of goods and technologies
Services exports (legal, financial, cultural and contents services)
Overseas investment fund
Facility and operation fund for overseas subsidiaries
Direct investment by overseas subsidiaries
Resources development fund
Development and production projects Exploration projects
Korea Eximbank will increase the issuance amount of the won-denominated bonds from 0.7 trillion won in 2006 to 1.7 trillion won in 2007, along with the issuance of foreign currency-denominated bonds worth US$100 million. It is expected to absorb and utilize idle money in supporting export and import companies. Korea Eximbank will establish a financing program that extends loan guarantees to foreign financial institutions providing loans to foreign buyers in large-scale projects that involve Korean companies. The program is designed to enhance the competency of Korean exporters. Aimed at absorbing domestic liquidity and promoting economic cooperation, Korea Eximbank will extend guarantees for foreign government bonds issued in Korea. (iv) The government will facilitate corporate expansion overseas through Economic Development Cooperation Fund (EDCF). With a view to supporting companies planning to enter emerging markets, the EDCF will be substantially increased.
50
January 2007
(Billion won)
EDCF (approved)
2005
2006
2007 (planned)
299.8
360.0
550.0
Fund for feasibility study will continue to rise in order to actively identifying blue chip projects. (Billion won)
EDCF for feasibility study
2005
2006
2007 (planned)
0.15
0.56
0.86
(2) Facilitating financial institutions’ entering overseas markets ( i ) In cases where financial holding companies establish overseas subsidiaries, they shall be subject to the same ODI procedures as financial institutions. Currently, financial holding companies are under relatively strict regulations in case of entering overseas markets since they are classified as non-financial institutions. (ii) In a bid to encourage financial institutions to enter overseas markets, guidelines for reporting of setting up overseas branches will be eased. Any financial institutions planning to set up a foreign branch operation was required to meet the regulation requiring net profit from at least half of the existing overseas branch operations. It is to be repealed. The minimum management rating requirement (third or higher) in the guidelines for reporting of overseas branches will be replaced with a minimum overall CAMELS rating1 requirement (third or higher). (iii) Limits to ODI by financial companies supporting new technology projects and small business investment companies will be abolished. Currently, they are permitted to make ODI within the range of their own capital. (3) Easing regulations to expand ODI ( i ) Some examination requirements such as financing and appropriateness of investment plan will be excluded for general ODI, shifting to a de-facto reporting system. In cases where all the requirements are satisfied, reporting will immediately be accepted. Currently, the acceptance of report is decided within 30 days. (ii) In case institutions handling financial and insurance businesses plan to make ODI in non-financial businesses overseas, or even companies with weak financial structure make ODI, they are required to report directly to the Ministry of Finance and Economy as of now. However, with the introduction of the new measure, they are allowed simply to make a report to any commercial bank. (iii) Currently, overseas direct investment vehicles are restricted to cash, capital goods and listed shares. However, non-listed and non-registered shares will be included in
1. Capital adequacy, Asset quality, Management quality, Earnings, Liquidity and sensitivity to market risk
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51
the vehicles. Documents required to submit for follow-up management will be either consolidated or abolished. (iv) A compensatory mechanism will be prepared for monitoring and taxation purposes in view of the eased regulation. ODI data are compiled by the Export-Import Bank of Korea and accordingly notified to the National Tax Service (NTS). And, only individuals’ reporting records are notified to the NTS. With the new measure, the whole process of data compilation and notification will be upgraded and utilized for taxation purpose. Reporting of corporations will also be notified. The ODI statistics system will be revised in line with international standards. ODI performance analysis will be substantiated as well.
2. Laying the foundation for facilitating overseas portfolio investment Given the relatively high risks involved in individuals’ investment in emerging markets, the government will encourage fund-type overseas investment with expertise and experiences.
( i ) A temporary tax exemption for three years will be applied to capital gains generated from overseas stock investment by investment trust and investment companies. (ii) Regulations will be eased on fund sales by foreign asset management companies. The scale of operational assets required for local fund sales by foreign asset management companies will be lowered from the current 5 trillion won to 1 trillion won. The restriction on the local sales of real estate fund and commodity fund managed by foreign asset management companies will be lifted. (iii) The government will boost business activities of domestic asset management companies. In case of the fund set by overseas subsidiaries of domestic asset management companies, sale of up to 90 percent of the asset under management of the fund will be allowed. The operational scope of overseas investment by domestic asset management companies will be expanded by revising the calculation method of Net Capital Ratio, a prudential supervision guideline for asset management companies. (iv) Currency swap linked to foreign currency loans will be expanded. With a view to facilitating overseas investment by utilizing foreign currency reserves, foreigncurrency loans linked currency swap with a cap of US$5 billion will be encouraged. It was launched by the Bank of Korea on January 1, 2007. Regarding the currency swap, fund uses will be diversified to permit investment in foreign securities. In addition, cutting edge facility and factory automation equipments will be included in the scope of the SOC investment related capital goods. Currently, the fund uses are limited to SOC investment related capital goods and overseas investment project financing. Comprehensive currency swap contract will be allowed from the current case-by-case currency swap contract.
52
January 2007
(v) The government will expand the scope of institutional investors with respect to the acquisition of foreign securities. Direct acquisition of foreign securities without the help of securities companies is permitted only to institutional investors. The scope of institutional investors will be expanded to “institutional investors� defined under the Securities and Exchange Act. National Pension Fund will also be included in the scope. Currently, only financial institutions are considered institutional investors.
3. Easing regulations on overseas real estate investment
With a view to minimizing risks from changes in overseas market, the government will encourage fund-type indirect investment, utilizing expertise of asset management companies and Real Estate Investment Trusts (REITs). Also, pertaining to the acquisition of overseas real estate with investment purpose, the limits will be upwardly adjusted in phases.
( i ) The government will ease regulations in order to boost overseas real estate investment through indirect investment. In cases where special purpose vehicle (SPV) is established by asset management company fund for overseas real estate investment, reporting requirements will be eased from reporting to the Ministry of Finance and Economy to reporting to banks. As for the fund type investment by REITs, refund will be granted on corporate tax paid overseas, thereby boosting the yield. (ii) Acquisition limit on overseas real estate by Korean nationals for investment purpose will be raised from the current US$1 million to US$3 million. Regarding residential purpose investment, the acquisition limit has already been liberalized as of March 2006. According to the Foreign Exchange Liberalization Plan announced in May 2006, the acquisition ceiling will upwardly be adjusted during the 2006-2007 period. The ceiling will be abolished during the 2008-2009 period. (iii) Investor convenience will be enhanced by softening up procedural restrictions. In cases where a third party makes remittance overseas through escrow account of brokers overseas, an obligatory reporting to the Bank of Korea (BOK) will be exempted. As for deposits abroad to acquire overseas real estate, reporting to the BOK will also be exempted.
4. Managing liquidity from overseas properly The government will properly respond to uncertainties such as the recent excess liquidity, surge in short-term external debt and public corporations' exposure to foreign exchange risks.
( i ) Prudential supervision on financial institutions will be strengthened continuously. Proper risk management will be encouraged while preparing to cope with a possible burden of foreign currency borrowers in case of foreign exchange rate rise. A joint
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53
fact-finding survey was conducted by the Bank of Korea and the Financial Supervisory Service on the status of foreign currency lending and soundness of 6 banks from November 22 to December 15, 2006. (ii) As for the foreign currency lending by financial institutions, 0.4 percent of contributions to Korea Credit Guarantee Fund and Korea Technology Credit Guarantee Fund will be levied as with the won lending. However, contributions will be exempted on facility fund as with the won lending as well. (iii) The government will encourage enhanced control of unnecessary and non-urgent overseas borrowings by public corporations, while expanding foreign exchange risk hedging on the public companies facing excess exposure to foreign exchange risks.
54
January 2007
Economic News Briefing Korea a promising market in 2007, said investment banks A host of global investment banks have analyzed that the Korean bourses are ‘promising’ among Asian markets in 2007 with some of them singling out Korea’s as ‘the most promising,’ giving a positive assessment in general. Citigroup and Macquarie recently picked Korea as the most promising market in 2007. Forecasting that Asian stock markets this year will be motivated more by valuation than by momentum amid dullish economic growth and growing volatility, Citigroup said that investors were likely to move to Korea, where valuation is low, from India, where momentum prevails. Macquarie, for its part, foresaw a boom market in Korea, citing the possibility of foreign investors’ comeback. It expected that Korea would be standing at the center of the Asian markets as the global economy turns round. Morgan Stanley Securities also sees the Korean stock market as ‘positive’ in 2007. South Korea and other nations with a positive or bullish outlook for the stock market have favorable factors such as abundant liquidity, a possible soft landing of their economies, recovery of corporate earnings and rational valuation of shares, Morgan Stanley said. Standard and Poor’s (S&P), the global credit assessment agency, came up with an analysis that the Korean market will be very successful, forecasting KOSPI to reach as high as 1,770 this year. Goldman Sachs, UBS and Credit Suisse also shared the optimistic assessment of the Korean stock market in their assessment for this year, with Goldman Sachs predicting KOSPI to reach 1,700.
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Korea eased control of dollar outflow The Bank of Korea bolstered lending in dollar to domestic foreign exchange banks through currency swap deals by expanding the use of the loans and simplifying the procedures from January 1, 2007. According to the eased rules, domestic banks are allowed to use the dollar loans to make portfolio investments overseas and to extend them to companies which import cutting edge facilities designated by the Ministry of Commerce, Industry and Energy as well as factory automation equipments entitled by the Ministry of Finance and Economy with the BOK’s lending in dollar. Also, an expost facto report is permitted to banks on the use of the funds when banks borrow dollar denominated loans several times by small amount, or when they use the loans to invest in overseas securities markets. The BOK began currency swap deals with commercial and state-owned banks from July 2005 in a bid to accelerate outflow of dollars that could help restrain the rising won and to improve management of foreign exchange reserve. As of December 15, 2006, currency swap deals between the BOK and banks stand at US$500 million.
French firm, first foreign investor to win cash incentive The Ministry of Commerce, Industry and Energy on December 22, 2006 concluded a contract with a French chemicals manufacturer Rhodia, which will invest US$47.4 million in the production of raw material for engineering plastic at the Onsan industrial plant in Ulsan, to offer 4.47 billion won as a cash incentive in return for the investment. The incentive is equivalent to 10 percent of the chemical company’s total investment. The French firm has become the first beneficiary of the cash incentive system since the government introduced the system in 2004, under which it pledged to subsidize a given amount of cash to foreign investors who invest a certain amount of money in high technology. The company is to spend the money on capital goods and construction of a factory, and is required to employ Korean.
Overseas resources development to be accelerated in 2007 Korea made considerable progress in overseas resources development during 2006 with investments in resources development projects by domestic companies amounting to US$1.7 billion, up 65 percent from a year earlier, boosting energy cooperation with resource rich countries, and successfully launching the oil development funds. As a result, accumulated oil and gas reserve secured for Korea increased 5.2 billion barrels for the year to 14 billion barrels, announced the Ministry of Industry, Commerce and Energy on December 29, 2006.
56
January 2007
The ministry expects Korea’s state and private companies to increase their investments in overseas resources development projects to US$2.6 billion in 2007, up 44 percent from the previous year, accelerating the development trend and improving Korea’s competitiveness in the projects. Korea will continue its efforts this year to further strengthen resource diplomacy, increase models connecting energy and other development plans, and expand infrastructure by raising funds, developing human resources and establishing R&D and information systems for resource developments.
Simplified securities registration planned for “well-known” issuers Registration process for equity and debt offerings by “well-known” issuers is planned to be significantly simplified in two phases to eliminate inefficiencies and unnecessary compliance burden in the securities offering rules, announced the Financial Supervisory Service (FSS) on December 29, 2006. Securities issuers are expected to be classified as a well-known issuer if: �Ten years or more have passed since the issuer was incorporated; � Five years or more have passed since the issuer became listed; �The issuer’s total market capitalization records 200 billion won or more, or its publicly placed debt within the past three years posts 300 billion won or more; �The issuer has reported all regulatory filings (quarterly, semiannual, and annual) on time for the past three years; �The issuer has not received any sanction from the FSC or Korea Exchange for violation of the Securities and Exchange Act or disclosure regulations in the last three years; and �The issuer has not been found guilty of, or does not face any ongoing litigation for accounting misconduct or violation of the Securities and Exchange Act in the last three years. In the first phase of the change, well-known issuers are to be permitted to use shelf registration for equity offerings, in addition to offerings for corporate bonds, equity-linked securities and derivatives-linked securities, which are already open to shelf registration. In the second phase, automatic shelf registration is to be introduced, under which well-known issuers, by filing an automatic shelf registration statement once every two years, may make equity and debt securities offerings of any amount only with a prospectus supplement. The FSS will prepare a draft of these amendments after consultations with the Ministry of Finance and Economy and other relevant organizations. Meanwhile, Korea Exchange scrapped a regulation that barred any change in a major shareholder’s holding for one year before an initial public offering from December 26, 2006 to vitalize initial public offering (IPO) and to bring regulations in line with global standards.
Economic Bulletin
57
Upward adjustments to minimum provisioning requirements for banks Minimum requirements for banks’ loan loss provisions would be elevated and the scope of bank loans subject to the provisioning requirements expanded as of December 31, 2006 to increase banks’ ability to absorb credit risk and enhance regulatory compliance with international standards, announced the Financial Supervisory Service on December 19, 2006.
Changed minimum provisioning requirements (%) Corporate loans
Household loans
Credit card receivables
Before change
After change
Before change
After change
Before change
After change
Normal assets
0.5
0.7
0.75
1.0
1.0
1.5
Precautionary assets
2.0
7.0
8.0
10.0
12.0
15.0
Note: The provisioning requirements for loans classified as substandard or below (SBLs) remain unchanged.
Meanwhile, the implementation of the advanced approaches of the New Basel Accord - the advanced internal ratings-based approach (IRB) for credit risk and the advanced measurement approach (AMA) for operational risk - is postponed to January 1, 2009 for all domestic banks. The implementation date was changed from the previously announced January 1, 2008 after the FSS conducted an assessment of banks’ preparedness for the New Basel Accord.
Timeline of the New Basel Accord implementation in major countries
Standard and foundation IRB1 approaches
Jan 1, 2007
Jan 1, 2008
EU, Japan, Hong Kong
Korea, Singapore, Australia, Thailand EU, Japan2, Hong Kong, Singapore, Australia
Advanced IRB1 approach
Jan, 2009
Jan 1, 2010 China (standardized approach only)
US, Korea, Thailand
1. Internal rating based 2. Introduction of the advanced approach in Japan is likely to be postponed one year.
Bank BIS Capital Ratio recorded 13.10% as of end September The average BIS capital adequacy ratio of domestic banks at the end of September 2006 edged up 0.1 percentage point to 13.10 percent from the end of 2005 average of 13.00 percent as a 14.2 percent growth (11.5 trillion won) in bank capital backed by robust net income offset a 13.3 percent increase (14.6 trillion won) in risk-weighted assets for the first nine months of 2006.
Bank BIS capital adequacy ratio
58
(End-period, %)
2001
2002
2003
2004
2005
Jun 2006
Sep 2006
11.68
11.33
11.16
12.08
13.00
13.06
13.10
January 2007
New measures proposed to advance the bond market The Financial Supervisory Commission (FSC) announced on December 14, 2006 a set of proposals aimed at advancing the bond market where corporate debt-financing has recently been declining amid falling capital demand for corporate investment and investors showing preference for cash accumulation. The new proposals are the work of a joint public-private task force set up in February 2006 to recommend improvement in four key areas - corporate bond underwriting, market liquidity, trading of repurchase agreements, and disclosure - and help raise the transparency and efficiency of the bond market. As a way to discourage unhealthy competition and improve the overall caliber of corporate bond underwriting, the task force proposes limiting the pool of lead managers to specialized bond dealers fully capable of taking on underwriting risks and giving more favorable considerations to securities firms that arrange due diligence and meetings with prospective investors during the underwriting in performance review of the specialized bond dealers. The task force also suggests that the off-exchange bids and offers currently scattered among different securities firms be centralized under Korea Securities Dealers Association (KSDA) to improve the transparency and liquidity of off-exchange bond trading. Pricing information centralized under KSDA should be disclosed via the KSDA or the member electronic networks. The execution and settlement of trading, however, continues individually. Concerning repurchase agreements (RP) trading, the proposals recommend lifting restrictions on the types of securities and expanding the types of entities eligible for it. It is also proposed that debt-related disclosures including default on notes and suspension of bank accounts be made mandatory for exchange-listed issuers to improve transparency and investor protection. The proposed changes are expected to facilitate more transparent and efficient bond trading, reducing information asymmetry in the bond market and improving conditions for debt underwriting for securities firms. The legal and regulatory amendments needed for the changes are expected to be completed by June 2007.
KOAFEC Consultative Group was inaugurated Korea-Africa Economic Cooperation Consultative Group (KOAFEC), jointly participated by Ministry of Finance and Economy, Korea Eximbank, and the African Development Bank (AfDB), held an inauguration meeting on December 14, 2006, at AfDB’s head office located in Tunis, Tunisia. The Consultative Group was designed as a follow-up to President Roh Moohyun’s “Korea’s Initiative for Africa’s Development,” announced during his visit to Africa in March 2006.
Economic Bulletin
59
The Group agreed to continuously identify and develop Action Plans in the four main areas of economic cooperation: infrastructure development, IT cooperation, human resources development, and the sharing of Korea’s knowledge and experience in economic development.
Korean carmakers gear up for hybrid production Korea’s top two carmakers, Hyundai Motor Co. and Kia Motors Corp., will start producing a limited number of hybrid automobiles exclusively for the Korean government early this year. The government and the auto industry completed their testing and researching of gasolineelectric cars in December 2006, as part of the first phase of launching the vehicle in Korea. In phase two, the government will further subsidize Hyundai and Kia to develop and manufacture models on a small scale until 2008. The government will invest a total of 38.9 billion won (US$41 million) in hybrid vehicles. A hybrid car runs on gasoline and electricity simultaneously and is considered the nextgeneration vehicle, fuel-efficient and environmentally friendly. The government and industry began researching and developing the hybrid in 2004. Hyundai and Kia will begin mass-producing hybrids in 2009, as part of the third phase of the project initiated by the government and the auto industry.
60
January 2007
Statistical Appendices Tables & Figures 1. National accounts 2. Production, shipment and inventory 3. Production capacity and operation ratio 4. Consumer goods sales index 5. Consumer goods shipment index and consumer sentiment index 6. Machinery orders received, domestic machinery shipment, and estimated facility investment index 7. Value of construction completed and domestic construction orders received 8. Composite indexes of business cycle indicators and BSI 9. Balance of payments (I) 10. Balance of payments (II) 11. Prices 12. Employment and earnings 13. Financial indicators 14. Monetary indicators 15. Exchange rates
Economic Bulletin
61
1. National accounts (year-on-year change, %, 2000 constant prices) Real GDP Period
1996
7.0
Agri., fores. & fisheries
Manufacturing
2.3
6.4
Gross fixed capital formation
Final consumption expenditure
7.0
Construction 8.4
7.5
Facilities 9.2
1997
4.7
4.6
4.9
3.2
-2.3
2.3
-9.6
1998
-6.9
-6.4
-7.9
-10.6
-22.9
-12.4
-42.3
1999
9.5
5.9
21.8
9.7
8.3
-3.8
36.8
2000
8.5
1.2
17.0
7.1
12.2
-0.8
33.6
2001
3.8
1.1
2.2
4.9
-0.2
6.0
-9.0
2002
7.0
-3.5
7.6
7.6
6.6
5.3
7.5
2003
3.1
-5.3
5.5
-0.3
4.0
7.9
-1.2
2004
4.7
9.2
11.1
0.4
2.1
1.1
3.8
2005P
4.0
-0.1
7.0
3.4
2.3
0.4
5.1
3.5
-2.4
3.4
2.3
-3.7
1.0
-9.4
2001
2002
2003
2004
I II
3.7
2.4
4.1
4.2
-3.5
0.8
-10.6
III
3.4
0.9
0.0
5.7
-0.5
9.6
-14.2
IV
4.6
1.2
1.3
7.3
6.2
10.7
-1.3
I
6.5
6.7
5.2
9.4
7.7
11.0
3.3
II
7.0
-2.7
6.2
8.5
7.3
6.0
8.0
III
6.8
-3.2
7.4
7.3
2.4
-2.4
9.1
IV
7.5
-5.5
11.4
5.3
9.1
8.4
9.6
I
3.8
-3.3
5.8
1.2
4.7
7.7
2.3
II
2.2
0.5
3.3
-0.6
4.2
7.9
-0.4
III
2.3
-7.8
4.2
-1.0
2.7
7.7
-4.6
IV
4.1
-6.9
8.6
-0.9
4.3
8.3
-2.0
I
5.4
10.1
11.9
-0.4
2.4
4.9
-0.1
II
5.7
4.2
13.6
0.7
4.7
3.8
6.4
III
4.7
4.3
11.7
0.1
2.9
1.0
6.8
IV
3.3
13.3
7.7
1.3
-1.1
-3.3
2.4
2005P I
2.7
-2.1
5.2
1.9
0.4
-2.2
2.9
II
3.2
2.6
5.0
3.2
2.0
1.7
2.7
III
4.5
-0.2
7.4
4.2
1.9
0.3
4.3
IV
5.3
-0.9
10.3
4.3
4.2
0.9
10.2
2006P I
6.1
4.4
9.9
4.9
3.9
1.2
6.9
II
5.3
-1.5
9.3
4.6
0.8
-3.9
7.4
III
4.8
-5.4
8.8
4.4
3.8
-0.6
9.9
P: Preliminary Source: The Bank of Korea
62
January 2007
Growth rate by economic activity
Growth rate by expenditure on GDP
Economic Bulletin
63
2. Production, shipment and inventory See graphs 6-1, 6-3, 7-1, 7-2 & 7-3 (constant prices, 2000 = 100)
Period
Production index
2002 2003 2004 2005
Y-o-Y change (%)
Shipment index
Y-o-Y change (%)
Inventory index
Y-o-Y change (%)
Service production index
Y-o-Y change (%)
108.8 114.5 126.2 134.1
8.0 5.2 10.2 6.3
109.2 114.3 124.7 131.7
7.8 4.7 9.1 5.6
104.5 110.9 121.2 124.1
-0.8 6.1 9.3 2.4
116.1 117.2 117.9 122.2
9.4 0.9 0.6 3.6
2003
I II III IV
110.2 112.7 109.7 125.5
6.4 3.4 3.3 8.1
110.0 113.1 109.4 124.8
4.9 3.3 3.1 7.3
112.1 112.6 110.7 110.9
10.0 9.5 8.4 6.1
113.5 117.8 116.6 121.0
2.0 0.8 0.5 0.6
2004
I II III IV
122.8 127.1 121.7 133.5
11.4 12.8 10.9 6.4
121.2 125.5 120.3 131.9
10.2 11.0 10.0 5.7
117.2 115.9 116.1 121.2
4.5 2.9 4.9 9.3
115.9 119.0 116.0 120.8
2.1 1.0 -0.5 -0.2
2005
I II III IV
127.1 131.6 130.4 147.3
3.5 3.5 7.1 10.3
125.6 129.9 128.0 143.2
3.6 3.5 6.4 8.6
127.6 124.3 122.8 124.1
8.9 7.2 5.8 2.4
116.8 121.9 122.3 127.8
0.8 2.4 5.4 5.8
2006
I II III
142.4 146.0 144.2
12.0 10.9 10.6
137.0 140.8 138.9
9.1 8.4 8.5
132.3 133.2 131.1
3.7 7.2 6.8
123.9 128.4 127.6
6.1 5.3 4.3
2004 1 2 3 4 5 6 7 8 9 10 11 12
115.5 121.8 131.0 126.9 127.3 127.0 122.4 119.6 123.0 133.0 134.3 133.1
4.8 17.6 12.2 11.4 13.9 12.9 12.9 10.4 9.4 5.3 9.6 4.1
114.0 119.7 129.9 125.8 125.1 125.5 120.4 118.3 122.3 132.1 133.2 130.3
4.2 15.1 11.4 10.3 11.5 11.2 12.3 9.7 8.1 4.8 9.2 3.1
114.2 116.7 117.2 115.0 117.4 115.9 117.4 117.3 116.1 116.3 119.0 121.2
4.1 5.3 4.5 1.3 3.5 2.9 3.3 3.5 4.9 5.7 8.4 9.3
114.1 111.9 121.7 118.3 119.0 119.6 116.2 114.4 117.5 117.8 118.2 126.5
0.0 3.9 2.5 0.6 0.6 1.7 -0.6 -0.6 -0.2 -0.7 -0.4 0.6
2005 1 2 3 4 5 6 7 8 9 10 11 12
131.9 112.6 136.8 131.1 131.9 131.7 131.0 127.7 132.4 143.7 150.1 148.2
14.2 -7.6 4.4 3.3 3.6 3.7 7.0 6.8 7.6 8.0 11.8 11.3
128.4 112.5 135.8 129.3 129.3 131.0 128.2 126.3 129.5 140.3 146.3 142.9
12.6 -6.0 4.5 2.8 3.4 4.4 6.5 6.8 5.9 6.2 9.8 9.7
128.6 127.3 127.6 127.8 128.1 124.3 126.7 122.7 122.8 122.7 122.6 124.1
12.6 9.1 8.9 11.1 9.1 7.2 7.9 4.6 5.8 5.5 3.0 2.4
115.2 111.4 123.7 120.6 122.3 122.9 121.5 121.3 124.0 123.4 125.4 134.7
1.0 -0.4 1.6 1.9 2.8 2.8 4.6 6.0 5.5 4.8 6.1 6.5
2006 1 2 3 4 5 6 7 8 9 10P 11P
141.0 135.8 150.5 144.1 147.8 146.1 136.9 141.6 154.2 150.2 159.5
6.9 20.6 10.0 9.9 12.1 10.9 4.5 10.9 16.5 4.5 6.3
134.2 131.5 145.2 139.3 142.2 141.0 130.1 137.5 149.0 143.2 152.5
4.2 16.9 6.9 7.7 10.0 7.6 1.5 8.9 15.1 2.1 4.2
128.8 130.6 132.3 132.3 134.3 133.2 135.4 131.8 131.1 131.7 131.9
0.2 2.6 3.7 3.5 4.8 7.2 6.9 7.4 6.8 7.3 7.6
123.2 118.3 130.3 127.6 129.3 128.3 123.8 127.2 131.9 127.5 131.9
6.9 6.2 5.3 5.8 5.7 4.4 1.9 4.9 6.4 3.3 5.2
P: Preliminary Source: Korea National Statistical Office
64
January 2007
3. Production capacity and operation ratio See graph 6-2
Period
2002 2003 2004 2005
Y-o-Y change (%)
Operation ratio index (2000=100)
Y-o-Y change (%)
Average operation ratio (%)
106.3 109.8 115.1 119.0
2.7 3.3 4.8 3.4
99.7 99.7 102.5 102.1
4.0 0.0 2.8 -0.4
78.4 78.3 80.4 79.8
Production capacity index (2000=100)
2003
I II III IV
108.8 109.7 109.6 111.2
3.6 3.5 2.8 3.2
97.2 100.9 95.0 105.7
1.3 -1.6 -2.6 2.7
78.2 77.4 77.2 80.4
2004
I II III IV
113.0 115.3 115.6 116.5
3.9 5.1 5.5 4.8
101.0 104.9 98.3 105.8
3.9 4.0 3.5 0.1
81.0 80.6 79.6 80.3
2005
I II III IV
117.2 118.1 118.9 121.7
3.7 2.4 2.9 4.5
99.4 104.1 98.7 106.0
-1.6 -0.8 0.4 0.2
79.6 79.4 79.9 80.2
2006
I II III
122.1 122.3 122.3
4.2 3.6 2.9
102.2 105.0 100.7
2.8 0.9 2.0
82.0 80.5 80.5
2004 1 2 3 4 5 6 7 8 9 10 11 12
112.3 112.9 113.8 114.7 115.6 115.7 115.6 115.6 115.6 116.1 116.5 116.9
3.8 4.3 3.5 4.5 5.3 5.7 5.6 5.5 5.5 4.9 4.6 4.9
94.3 100.7 108.0 105.4 104.9 104.5 100.0 96.5 98.5 106.6 107.2 103.6
-2.7 9.6 5.0 2.3 5.2 4.6 6.4 3.0 1.2 -2.4 4.1 -1.2
79.9 82.9 80.1 80.5 81.6 79.6 79.4 79.5 79.9 79.8 81.2 79.8
2005 1 2 3 4 5 6 7 8 9 10 11 12
117.1 117.2 117.3 117.3 118.4 118.5 118.5 118.6 119.5 121.0 122.0 122.1
4.3 3.8 3.1 2.3 2.4 2.4 2.5 2.6 3.4 4.2 4.7 4.4
102.7 86.8 108.6 104.8 104.0 103.6 101.8 96.2 98.2 104.9 108.7 104.5
8.9 -13.8 0.6 -0.6 -0.9 -0.9 1.8 -0.3 -0.3 -1.6 1.4 0.9
81.2 77.2 80.5 79.1 79.0 80.0 80.9 79.4 79.3 79.0 82.1 79.4
2006 1 2 3 4 5 6 7 8 9 10P 11P
122.1 122.1 122.2 122.2 122.4 122.4 122.4 122.2 122.2 123.8 123.9
4.3 4.2 4.2 4.2 3.4 3.3 3.3 3.0 2.3 2.3 1.6
99.9 97.5 109.3 103.4 106.0 105.6 94.8 97.8 109.4 101.1 109.5
-2.7 12.3 0.6 -1.3 1.9 1.9 -6.9 1.7 11.4 -3.6 0.7
83.5 80.9 81.5 79.0 80.6 82.0 76.8 80.7 84.1 81.5 82.4
P: Preliminary Source: Korea National Statistical Office
Economic Bulletin
65
4. Consumer goods sales index See graphs 2-2, 2-3, 2-4 & 2-5 (constant prices, 2000 = 100)
Period
2002 2003 2004 2005
Consumer goods sales index
Y-o-Y change (%)
Y-o-Y change (%)
Semi-durable goods
Y-o-Y change (%)
Non-durable goods
Y-o-Y change (%)
118.7 115.0 114.1 118.6
10.5 -3.1 -0.8 3.9
124.8 113.4 108.9 115.3
15.4 -9.1 -4.0 5.9
117.4 111.4 115.8 124.9
8.9 -5.1 3.9 7.9
116.3 117.6 115.9 117.4
8.9 1.1 -1.4 1.3
2003
I II III IV
113.7 114.0 112.9 119.5
-1.0 -3.9 -4.6 -3.0
113.1 114.4 112.1 113.8
-4.3 -11.8 -10.4 -9.8
111.6 109.3 98.4 126.3
-2.3 -7.8 -9.2 -1.7
115.1 116.0 120.2 119.1
1.6 2.7 0.6 -0.1
2004
I II III IV
112.2 113.7 111.6 118.9
-1.3 -0.3 -1.2 -0.5
102.5 107.1 109.3 116.7
-9.4 -6.4 -2.5 2.5
112.6 117.4 101.9 131.3
0.9 7.4 3.6 4.0
117.0 115.4 117.3 114.1
1.7 -0.5 -2.4 -4.2
2005
I II III IV
113.5 117.6 116.5 127.0
1.2 3.4 4.4 6.8
105.5 113.9 116.4 125.4
2.9 6.3 6.5 7.5
115.5 125.9 111.7 146.6
2.6 7.2 9.6 11.7
116.6 115.7 118.8 118.4
-0.3 0.3 1.3 3.8
2006
I II III
119.2 124.1 119.1
5.0 5.5 2.2
116.9 124.0 128.1
10.8 8.9 10.1
124.1 134.4 114.9
7.4 6.8 2.9
118.0 119.2 116.7
1.2 3.0 -1.8
2004 1 2 3 4 5 6 7 8 9 10 11 12
118.0 105.7 113.0 113.4 115.0 112.8 111.6 105.2 117.9 116.6 117.3 122.9
-3.4 1.3 -1.6 -0.5 -2.3 2.4 -0.5 -3.1 0.0 -1.9 -1.3 1.9
101.6 100.5 105.5 109.6 104.4 107.2 114.3 104.7 109.0 114.4 114.7 121.1
-13.6 -5.7 -8.3 -6.7 -9.8 -2.4 -1.1 -2.1 -4.2 -2.1 2.9 7.1
116.7 106.9 114.3 119.5 124.1 108.7 104.2 88.3 113.2 130.0 132.4 131.5
-0.6 7.1 -2.9 5.3 6.3 11.4 6.4 -0.9 4.7 5.5 1.9 4.5
126.9 107.8 116.2 112.5 116.1 117.6 113.7 113.5 124.6 111.2 111.4 119.7
0.2 2.5 2.5 0.2 -2.5 0.9 -3.1 -4.4 0.0 -5.6 -5.2 -1.9
2005 1 2 3 4 5 6 7 8 9 10 11 12
113.3 109.6 117.6 116.7 119.4 116.8 117.3 112.1 120.0 120.9 125.3 134.7
-4.0 3.7 4.1 2.9 3.8 3.5 5.1 6.6 1.8 3.7 6.8 9.6
105.3 98.3 112.8 112.8 114.0 114.8 126.1 115.3 107.8 115.6 126.2 134.5
3.6 -2.2 6.9 2.9 9.2 7.1 10.3 10.1 -1.1 1.0 10.0 11.1
115.7 108.0 122.9 126.7 131.6 119.3 113.6 97.8 123.6 141.4 143.0 155.5
-0.9 1.0 7.5 6.0 6.0 9.8 9.0 10.8 9.2 8.8 8.0 18.3
116.1 116.1 117.6 114.0 116.4 116.7 114.6 117.4 124.3 113.8 116.4 124.9
-8.5 7.7 1.2 1.3 0.3 -0.8 0.8 3.4 -0.2 2.3 4.5 4.3
2006 1 2 3 4 5 6 7 8 9 10P 11P
123.2 110.6 123.7 122.6 126.3 123.3 115.8 116.0 125.6 126.5 130.4
8.7 0.9 5.2 5.1 5.8 5.6 -1.3 3.5 4.7 4.6 4.1
111.3 113.4 125.9 119.0 123.3 129.8 123.7 127.7 132.8 123.6 137.0
5.7 15.4 11.6 5.5 8.2 13.1 -1.9 10.8 23.2 6.9 8.6
125.6 115.9 130.8 138.0 141.2 123.9 115.7 99.7 129.2 141.4 152.6
8.6 7.3 6.4 8.9 7.3 3.9 1.8 1.9 4.5 0.0 6.7
128.1 106.6 119.2 117.2 120.7 119.7 111.9 117.9 120.3 120.8 116.6
10.3 -8.2 1.4 2.8 3.7 2.6 -2.4 0.4 -3.2 6.2 0.2
P: Preliminary Source: Korea National Statistical Office
66
Durable goods
January 2007
5. Consumer goods shipment index and consumer sentiment index See graph 2-6
Period
2002 2003 2004 2005
Domestic consumer goods shipment index (2000=100) Y-o-Y change (%)
Consumer sentiment index Durable goods
Y-o-Y change (%)
Non-durable goods
Y-o-Y change (%)
Present Expectations situation index index
111.1 107.3 105.8 108.0
8.3 -3.4 -1.4 2.1
120.3 111.7 106.4 112.6
17.1 -7.1 -4.7 5.8
106.9 104.7 103.6 104.2
4.3 -2.1 -1.1 0.6
-
-
2003
I II III IV
107.0 104.6 104.2 113.3
-0.8 -5.5 -4.8 -2.8
112.9 113.0 105.4 115.5
-1.2 -8.4 -10.6 -8.2
104.2 100.6 103.2 110.8
-0.8 -4.4 -2.3 -0.9
-
-
2004
I II III IV
107.2 104.9 102.5 108.7
0.2 0.3 -1.6 -4.1
110.4 108.5 99.6 107.3
-2.2 -4.0 -5.5 -7.1
104.8 101.3 101.7 106.5
0.6 0.7 -1.5 -3.9
-
-
2005
I II III IV
102.4 105.3 107.7 116.6
-4.5 0.4 5.1 7.3
101.8 111.2 111.5 126.0
-7.8 2.5 11.9 17.4
100.6 101.3 104.7 110.4
-4.0 0.0 2.9 3.7
-
-
2006
I II III
109.1 110.8 112.9
6.5 5.2 4.8
116.8 125.1 121.9
14.7 12.5 9.3
104.3 103.7 108.5
3.7 2.4 3.6
-
-
2004 1 2 3 4 5 6 7 8 9 10 11 12
106.2 103.5 112.0 107.9 103.5 103.2 102.5 100.7 104.4 108.5 108.8 108.9
-5.7 3.7 3.2 1.6 -1.4 0.7 -0.3 -1.9 -2.5 -5.5 -0.3 -6.2
103.3 112.1 115.7 112.6 106.7 106.1 102.4 96.6 99.8 108.7 109.1 104.1
-9.0 2.2 0.3 -3.0 -6.7 -2.1 -2.9 -3.0 -10.2 -8.0 -3.5 -9.9
106.8 98.5 109.0 104.2 100.0 99.8 100.7 100.9 103.6 105.6 105.3 108.6
-4.8 3.2 3.7 2.8 -0.8 0.3 -0.8 -2.5 -1.1 -5.7 -0.5 -5.2
101.2 99.0 96.4 103.0 97.1 94.1 90.8 88.3 90.1 89.1 87.8 86.5
72.6 71.9 68.5 74.9 70.7 67.3 66.2 63.1 65.0 65.1 62.8 62.2
2005 1 2 3 4 5 6 7 8 9 10 11 12
107.2 91.7 108.2 103.9 104.9 107.1 106.7 107.0 109.4 113.8 117.6 118.4
0.9 -11.4 -3.4 -3.7 1.4 3.8 4.1 6.3 4.8 4.9 8.1 8.7
102.1 91.4 112.0 107.5 110.6 115.4 116.1 108.1 110.4 122.4 128.9 126.8
-1.2 -18.5 -3.2 -4.5 3.7 8.8 13.4 11.9 10.6 12.6 18.1 21.8
106.9 90.3 104.5 100.6 101.1 102.1 101.5 105.2 107.3 107.8 110.2 113.2
0.1 -8.3 -4.1 -3.5 1.1 2.3 0.8 4.3 3.6 2.1 4.7 4.2
92.5 102.5 105.7 104.7 102.2 97.8 97.2 96.7 99.1 100.0 101.5 103.0
66.5 83.2 89.6 90.2 85.5 79.7 78.9 78.3 81.2 83.4 84.9 85.3
2006 1 2 3 4 5 6 7 8 9 10 11 12
110.2 103.0 114.1 108.3 111.6 112.5 104.4 109.9 124.3 113.7P 121.9P -
2.8 12.3 5.5 4.2 6.4 5.0 -2.2 2.7 13.6 -0.1P 3.7P -
113.0 113.6 123.8 118.0 125.7 131.7 110.3 117.6 137.9 127.3P 139.7P -
10.7 24.3 10.5 9.8 13.7 14.1 -5.0 8.8 24.9 4.0P 8.4P -
107.2 97.3 108.4 103.0 104.6 103.6 101.7 106.6 117.3 107.0P 113.6P -
0.3 7.8 3.7 2.4 3.5 1.5 0.2 1.3 9.3 -0.7P 3.1P -
104.5 103.8 103.4 100.6 98.0 97.4 94.3 93.7 94.8 93.9 95.2 93.7
88.4 89.0 90.1 87.2 83.0 81.9 78.7 77.8 78.9 80.7 77.3 77.1
P: Preliminary Source: Korea National Statistical Office
Economic Bulletin
67
6. Machinery orders received, domestic machinery shipment and estimated facility investment index See graph 3-2 Domestic machinery orders received excluding ship (billion won) Period
2004 2005
Domestic machinery shipment excluding ship (2000=100)
Total
Public
Private
23,913 24,260
2,563 2,484
21,350 21,776
10,597 10,195
98.5 101.8
101.2 101.8
Manufacturing
2005
I II III IV
6,207 6,008 5,796 6,248
694 390 580 820
5,514 5,618 5,217 5,427
2,632 2,800 2,330 2,433
101.2 105.3 95.7 104.8
97.2 104.8 98.5 106.8
2006
I II III
6,901 7,259 6,700
292 559 673
6,609 6,700 6,027
3,426 3,544 3,060
105.6 109.7 105.3
102.0 109.0 104.5
2005 7 8 9 10 11 12
1,938 1,968 1,890 1,928 1,929 2,391
224 221 134 244 145 431
1,714 1,747 1,756 1,684 1,784 1,960
780 754 797 727 798 908
99.3 94.8 93.0 99.2 100.5 114.6
101.8 96.5 97.1 98.2 100.6 121.5
2006 1 2 3 4 5 6 7 8 9 10P 11P
2,110 2,344 2,446 2,376 2,225 2,657 1,886 2,268 2,546 2,605 2,151
79 96 117 94 93 372 71 257 344 636 72
964 1,199 1,263 1,229 1,074 1,241 865 1,015 1,179 1,016 1,001
96.4 97.9 122.4 109.2 110.9 109.0 103.4 105.2 107.2 105.5 105.8
92.9 96.7 116.3 105.3 112.9 108.8 95.6 104.4 113.6 102.1 112.0
6.8 1.5
17.6 -3.1
5.7 2.0
22.8 -3.8
1.4 3.4
-1.3 0.6
2004 2005
2,031 2,248 2,329 2,283 2,132 2,285 1,815 2,011 2,202 1,968 2,079 Y-o-Y change (%)
2005
I II III IV
-6.9 -12.2 14.0 17.5
7.8 -51.3 38.9 17.1
-8.4 -7.1 11.7 17.6
-10.3 -6.5 2.7 1.4
3.9 1.4 1.1 7.0
-0.3 -1.1 2.4 1.8
2006
I II III
11.2 20.8 15.6
-57.9 43.3 16.1
19.9 19.3 15.5
30.2 26.6 31.3
4.3 4.2 10.0
4.9 4.0 6.0
2005 7 8 9 10 11 12
26.2 18.3 0.1 0.7 11.7 42.8
179.8 116.5 -43.0 57.2 -28.8 26.2
17.8 11.9 6.3 -4.3 17.1 47.1
13.1 1.7 -5.0 -24.9 3.0 38.4
4.3 0.3 -1.6 1.6 6.6 12.6
4.6 1.3 1.0 -2.9 1.5 6.2
2006 1 2 3 4 5 6 7 8 9 10P 11P
2.0 38.7 -0.1 15.3 12.6 34.8 -2.7 15.2 34.7 35.1 11.5
-18.9 30.2 -77.6 -30.9 -16.5 160.9 -68.2 16.3 156.8 160.4 -50.3
3.0 39.1 21.0 18.6 14.4 25.0 5.9 15.1 25.4 16.9 16.5
-2.2 63.5 38.2 25.1 13.0 43.1 11.0 34.6 48.0 39.9 25.4
0.1 2.4 9.6 7.1 2.5 3.0 4.1 11.0 15.3 6.4 5.3
1.1 11.4 3.0 1.3 9.2 1.7 -6.1 8.2 17.0 4.0 11.3
P: Preliminary Source: Korea National Statistical Office
68
Estimated facility investment index (2000=100)
January 2007
7. Value of construction completed and domestic construction orders received See graphs 4-2 & 4-3
(billion won)
Period
2004 2005
Type of order
Value of construction completed (total)
Public
72,838 77,026
Type of order
Private
Domestic construction orders received (total)
Public
Private
23,916 23,682
46,649 50,688
77,774 85,182
22,210 22,572
51,510 59,880
2005
I II III IV
15,851 20,218 18,930 22,027
4,849 6,226 5,680 6,926
10,536 13,369 12,583 14,200
18,384 25,244 17,205 24,349
4,494 6,022 3,613 8,443
13,059 18,069 13,419 15,332
2006
I II III
16,767 20,495 20,144
4,366 5,974 6,239
11,862 13,884 13,301
16,605 21,689 23,425
3,986 4,316 4,418
12,277 17,055 18,249
2005 7 8 9 10 11 12
6,115 6,268 6,547 6,508 7,219 8,299
1,807 1,786 2,087 1,876 2,106 2,944
4,100 4,254 4,230 4,384 4,826 4,990
6,795 5,142 5,268 5,358 6,382 12,609
1,174 1,081 1,357 1,297 2,287 4,859
5,519 4,050 3,850 4,003 3,981 7,349
2006 1 2 3 4 5 6 7 8 9 10P 11P
5,158 5,042 6,567 6,560 6,679 7,256 6,070 6,481 7,593 6,998 7,754
1,371 1,266 1,729 1,865 1,934 2,174 1,804 1,949 2,487 2,229 2,314
5,996 4,543 6,066 5,291 7,135 9,263 7,291 5,910 10,223 5,439 9,205
975 1,536 1,475 1,198 1,526 1,592 1,043 879 2,496 1,743 2,876
4,885 2,905 4,488 4,048 5,506 7,501 6,154 4,605 7,490 3,568 6,196
11.1 5.7
4.9 -1.0
14.8 8.7
-3.9 9.5
13.5 1.6
-11.6 16.2
2004 2005
3,627 3,612 4,624 4,504 4,537 4,843 4,104 4,362 4,836 4,567 5,184 Y-o-Y change (%)
2005
I II III IV
1.9 9.6 3.8 6.9
-1.0 3.1 -6.6 0.4
3.1 13.0 8.5 9.2
22.3 38.5 15.8 -17.9
22.2 73.7 0.0 -26.3
18.3 30.9 29.1 -5.8
2006
I II III
5.8 1.4 6.4
-10.0 -4.1 9.8
12.6 3.8 5.7
-9.7 -14.1 36.2
-11.3 -28.3 22.3
-6.0 -5.6 36.0
2005 7 8 9 10 11 12
4.5 4.3 2.6 3.0 11.3 6.5
-1.6 -10.0 -7.7 -3.3 -2.4 5.2
7.1 10.7 7.9 5.3 17.5 5.5
6.3 18.3 27.8 -35.3 3.2 -17.0
-10.5 17.8 -1.9 -58.4 1.6 -20.1
22.1 20.1 53.7 -16.9 3.8 -3.6
2006 1 2 3 4 5 6 7 8 9 10P 11P
2.5 9.2 5.9 2.0 1.0 1.1 -0.7 3.4 16.0 7.5 7.4
-10.3 -12.8 -7.5 -4.6 -3.2 -4.3 -0.2 9.1 19.1 18.8 9.9
8.5 18.2 11.8 5.2 2.7 3.7 0.1 2.5 14.3 4.2 7.4
10.9 22.2 -34.5 -18.8 -17.9 -7.7 7.3 14.9 94.1 1.5 44.2
-32.1 144.5 -39.3 -38.1 -21.8 -25.4 -11.2 -18.7 84.0 34.5 25.7
38.8 -4.7 -30.9 -9.3 -15.1 5.4 11.5 13.7 94.6 -10.9 55.6
P: Preliminary Source: Korea National Statistical Office
Economic Bulletin
69
8. Composite indexes of business cycle indicators and BSI See graphs 13-1, 13-2 & 13-3
Y-o-Y change (%)
Coincident index (2000=100)
Cycle of coincident index (2000=100)
BSI (actual)
BSI (outlook)
114.1 115.2 115.9 117.1 117.7 118.4
1.3 2.0 2.6 3.7 4.3 5.0
118.1 118.9 119.4 120.9 121.6 122.7
99.4 99.6 99.7 100.4 100.6 101.1
79.1 85.1 89.4 103.4 98.9 100.4
90.3 91.4 109.6 110.3 102.8 98.7
2004 1 2 3 4 5 6 7 8 9 10 11 12
118.9 119.4 119.3 119.4 119.6 119.8 119.9 119.7 119.8 120.2 120.4 120.7
5.2 5.4 5.1 4.9 4.8 4.6 4.3 3.7 3.3 3.0 2.6 2.4
123.4 124.2 124.5 124.9 125.1 125.3 125.2 125.1 125.4 126.0 126.4 126.8
101.2 101.5 101.3 101.2 100.9 100.6 100.2 99.7 99.4 99.5 99.4 99.3
90.7 95.3 104.2 101.7 90.2 86.8 83.8 81.2 93.4 92.2 82.2 80.9
99.8 104.9 113.6 104.3 113.2 92.1 86.4 86.4 95.5 99.2 90.3 82.2
2005 1 2 3 4 5 6 7 8 9 10 11 12
120.9 121.5 122.5 122.9 123.4 123.7 124.7 125.7 126.5 127.1 128.3 129.5
2.1 2.3 2.9 3.0 3.2 3.3 4.0 4.7 5.1 5.3 6.0 6.8
127.3 127.3 128.1 128.3 129.2 129.8 130.8 131.7 132.3 132.6 133.6 134.5
99.3 98.9 99.0 98.8 99.1 99.1 99.5 99.8 99.7 99.5 99.9 100.1
84.6 87.2 110.7 107.0 98.2 93.4 91.7 91.0 99.2 98.0 101.8 107.1
77.8 85.7 119.2 117.6 114.1 105.1 96.5 91.7 111.4 110.2 107.8 103.8
2006 1 2 3 4 5 6 7 8 9 10 11 12
130.8 130.9 130.9 130.5 130.6 130.7 130.9 131.3 132.3P 133.3P 134.2P -
7.5 7.1 6.6 5.8 5.3 4.8 4.3 3.9 4.1P 4.5P 4.6P -
135.9 136.1 136.8 136.6 137.0 137.4 137.0 137.8 139.0 141.3P 142.3P -
100.8 100.5 100.5 100.0 99.9 99.8 99.0 99.2 99.6 100.8P 101.1P -
95.4 90.5 111.5 99.8 94.1 94.2 79.1 85.9 99.4 99.4 103.7 100.4
102.6 102.4 118.9 112.7 110.7 98.6 94.2 93.4 107.7 103.5 104.3 101.4
2007 1
-
-
-
-
-
96.5
Period
Leading index (2000=100)
2003 7 8 9 10 11 12
P: Preliminary Source: Korea National Statistical Office & The Federation of Korean Industries
70
January 2007
9. Balance of payments (I) See graphs 5-1, 5-2, 5-3, 10-1 & 10-2 (million US$)
Current balance
Period
Goods trade balance
Exports
Imports
Services trade balance
Income trade balance
Current transfers
2002
5,393.9
14,777.4
162,470.5
152,126.2
-8,197.5
432.3
-1,618.3
2003
11,949.5
21,952.0
193,817.4
178,826.7
-7,424.2
326.3
-2,904.6
2004
28,173.5
37,568.8
253,844.7
224,462.7
-8,046.1
1,082.8
-2,432.0
2005
14,980.9
32,683.1
284,418.7
261,238.3
-13,092.2
-1,562.5
-2,481.5
2004
2005
I
6,418.4
8,585.4
59,298.9
52,797.5
-1,870.9
497.6
-793.7
II
6,856.6
10,060.7
63,974.7
55,269.7
-1,358.1
-1,168.4
-677.6
III
7,565.4
9,752.9
61,633.9
54,707.8
-2,305.2
461.4
-343.7
IV
7,333.1
9,169.8
68,937.1
61,687.7
-2,511.9
1,292.2
-617.0
I
5,263.5
8,750.5
66,807.6
60,626.8
-3,114.4
166.4
-539.0
II
2,352.1
8,365.8
69,702.8
63,694.9
-3,368.7
-1,948.8
-696.2
III
2,198.2
7,234.8
71,097.7
66,228.3
-4,254.6
-97.3
-684.7
IV
5,167.1
8,332.0
76,810.7
70,688.3
-2,920.5
317.2
-561.6
2006P I
-1,118.4
5,222.6
73,893.3
72,501.7
-4,996.2
-481.7
-863.0
II
692.0
7,413.7
81,473.1
76,622.6
-3,878.9
-1,648.0
-1,194.8
III
374.9
6,227.9
82,729.3
80,281.7
-5,384.7
608.6
-1,076.9
2005 1
3,682.3
4,356.6
22,454.0
19,450.0
-948.6
498.0
-223.7
2
781.4
1,489.1
20,401.1
18,396.9
-1,008.4
447.7
-147.0
3
799.8
2,904.8
23,952.5
22,779.9
-1,157.4
-779.3
-168.3
4
-1,202.2
2,233.7
22,872.5
21,244.5
-1,053.6
-2,121.9
-260.4
5
1,444.3
2,558.5
23,122.7
21,161.8
-1,182.2
296.5
-228.5
6
2,110.0
3,573.6
23,707.6
21,288.6
-1,132.9
-123.4
-207.3
7
1,237.6
3,052.7
23,235.5
21,508.8
-1,484.3
-91.6
-239.2
8
-527.9
1,472.4
23,343.0
22,000.8
-1,696.6
-71.1
-232.6
9
1,488.5
2,709.7
24,519.2
22,718.7
-1,073.7
65.4
-212.9
10
2,830.3
3,477.0
25,352.7
22,652.7
-610.0
61.8
-98.5
11
2,056.8
3,187.2
25,826.2
23,849.6
-875.1
-80.4
-174.9
12
280.0
1,667.8
25,631.7
24,186.0
-1,435.4
335.8
-288.2
2006P 1
91.2
1,478.2
23,259.2
23,064.7
-1,644.0
571.4
-314.3
2
-782.8
837.3
23,788.6
23,500.0
-1,808.2
418.9
-230.8
3
-426.8
2,907.1
26,845.5
25,937.0
-1,544.0
-1,472.0
-317.9
4
-1,608.1
1,883.9
25,591.9
24,450.5
-1,345.7
-1,876.5
-269.8
5
1,359.6
2,815.3
27,931.0
26,162.4
-1,354.5
387.1
-488.3
6
940.5
2,714.5
27,950.2
25,009.7
-1,178.7
-158.6
-436.7
7
-392.7
1,619.4
25,779.8
25,536.3
-1,744.0
44.4
-312.5
8
-638.3
1,443.2
27,292.7
27,036.8
-2,087.3
311.7
-305.9
9
1,405.9
3,165.3
29,656.8
27,708.6
-1,553.4
252.5
-458.5
10
1,759.9
2,685.5
28,053.9
25,639.4
-1,192.8
461.2
-194.0
11
4,237.5
5,712.6
30,661.1
26,763.3
-1,426.3
236.3
-285.1
P: Preliminary Source: The Bank of Korea & Korea Customs Service
Economic Bulletin
71
10. Balance of payments (II) See graph 10-3 (million US$) Capital & financial account
Direct investment
2002
6,251.5
-224.2
2003
13,909.4
100.0
2004
7,598.8
4,588.3
2005
4,756.5
Period
2004
2005
Changes in reserve assets
Errors and omissions
Other investment
Capital transfers & acquisition of non-financial assets
708.7
6,853.8
-1,086.8
-11,799.4
17,906.5
-2,698.7
-1,398.4
-25,849.4
-9.5
8,619.3
-3,856.0
-1,752.8
-38,710.5
2,938.2
2,010.4
-1,728.2
6,814.7
-2,340.4
-19,805.8
68.4
Portfolio investment
154.0
I
3,980.6
-680.6
10,260.3
-5,226.3
-372.8
-8,746.9
-1,652.1
II
-6,066.6
3,163.8
-757.0
-8,002.9
-470.5
-4,005.5
3,215.5
III
-1,137.1
144.4
1,621.2
-2,514.9
-387.8
-6,805.7
377.4
IV
10,821.9
1,960.7
-2,505.2
11,888.1
-521.7
-19,152.4
997.4
I
4,141.5
-194.0
-1,278.2
6,125.5
-511.8
-9,513.7
108.7
II
2,257.6
1,249.7
-2,575.3
4,247.5
-664.3
-2,817.2
-1,792.5
III
-504.3
48.8
-147.5
256.8
-662.4
-2,300.1
606.2
IV
-1,138.3
905.9
2,272.8
-3,815.1
-501.9
-
2006P I
6,524.4
-1,306.7
1,436.2
7,083.8
-688.9
-5,679.3
II
3,684.4
780.4
-14,176.7
17,880.6
-799.9
-4,315.7
-60.7
III
4,773.7
-3,656.5
-7,395.3
16,479.6
-654.1
-3,615.4
-1,533.2 -1,183.9
1,146.0 273.3
2005 1
376.1
101.6
-1,489.7
1,950.3
-186.1
-2,874.5
2
1,061.5
-255.4
1,864.5
-401.7
-145.9
-1,848.6
5.7
3
2,703.9
-40.2
-1,653.0
4,576.9
-179.8
-4,790.6
1,286.9
4
2,430.5
1,457.1
-972.8
2,182.9
-236.7
-625.4
-602.9
5
1,523.1
-231.1
-740.7
2,730.5
-235.6
-1,636.7
-1,330.7
6
-1,696.0
23.7
-861.8
-665.9
-192.0
-555.1
141.1
7
-9.0
-440.0
2,579.4
-1,936.8
-211.6
-873.2
-355.4
8
212.7
327.8
1,103.9
1,209.2
-220.4
-450.3
765.5
9
-708.0
161.0
-1,623.0
984.4
-230.4
-976.6
196.1
10
-1,941.8
74.5
-3,168.6
1,319.8
-167.5
-715.9
-172.6
11
158.5
160.3
5,406.6
-5,213.5
-194.9
-2,518.6
303.3
12
645.0
671.1
34.8
78.6
-139.5
-1,940.3
1,015.3
2006P 1
3,628.2
-319.4
609.5
3,561.3
-223.2
-5,432.6
1,713.2
2
2,110.2
190.4
2,207.1
-92.7
-194.6
140.7
-1,468.1
3
786.0
-1,177.7
-1,380.4
3,615.2
-271.1
-387.4
28.2
4
4,862.8
585.2
-3,180.0
7,745.1
-287.5
-3,354.6
99.9
5
513.1
125.6
-7,880.1
8,509.1
-241.5
-495.6
-1,377.1
6
-1,691.5
69.6
-3,116.6
1,626.4
-270.9
-465.5
1,216.5
7
1,730.1
-114.2
-3,669.2
5,789.4
-275.9
-686.0
-651.4
8
1,234.9
-663.3
-4,448.2
6,511.4
-165.0
-959.8
363.2
9
1,808.7
-2,879.0
772.1
4,178.8
-213.2
-1,969.6
-1,245.0
10
-2,263.8
-57.9
-614.1
-1,328.7
-263.1
-956.2
1,460.1
11
436.0
126.1
-653.5
1,286.9
-323.5
-2,695.1
-1,978.4
P: Preliminary Source: The Bank of Korea
72
January 2007
11. Prices See graphs 11-1, 11-2 & 11-3 (2000 = 100) Consumer prices (2005=100)
Producer prices
Export & import prices
Period All Items
Commodity
Service
Core
All items
Commodity
Export
Import
2002 2003 2004 2005 2006
90.8 93.9 97.3 100.0 102.2
90.0 93.0 96.9 100.0 101.5
91.4 94.8 97.7 100.0 102.7
92.1 94.9 97.7 100.0 101.8
99.2 101.4 107.6 109.9 112.4
97.7 99.7 107.2 109.8 112.6
89.5 87.5 92.9 86.7 85.1
97.1 98.9 108.9 112.0 118.0
2005 7 8 9 10 11 12
100.0 100.3 100.8 100.6 100.2 100.5
99.8 100.3 101.5 101.1 99.7 100.4
100.1 100.3 100.3 100.3 100.5 100.7
100.0 100.1 100.2 100.2 100.2 100.4
109.9 110.2 110.8 111.0 110.4 110.2
109.8 110.3 111.0 111.2 110.3 109.9
87.5 87.0 88.8 89.1 86.4 85.0
114.3 116.5 118.8 118.6 115.5 114.8
2006 1 2 3 4 5 6 7 8 9 10 11 12
101.1 101.3 101.9 102.0 102.2 102.0 102.4 103.0 103.3 102.8 102.3 102.6
101.1 101.1 101.1 101.3 101.6 101.0 101.5 103.0 103.1 101.8 100.7 101.2
101.1 101.4 102.3 102.5 102.6 102.7 103.0 103.1 103.4 103.4 103.4 103.6
100.6 100.8 101.4 101.5 101.9 101.9 102.1 102.2 102.2 102.2 102.3 102.5
110.9 110.9 111.0 111.8 112.5 112.5 113.0 113.9 114.2 113.1 112.5 112.6
110.7 110.7 110.9 111.9 112.8 112.9 113.5 114.7 114.9 113.3 112.4 112.5
83.8 82.5 83.3 83.6 84.7 86.2 87.1 89.1 87.3 85.9 84.1 83.6
115.0 113.7 114.3 117.2 119.7 120.7 123.3 125.3 119.1 116.9 115.1 115.4
Y-o-Y change (%) 2002 2003 2004 2005 2006
2.8 3.5 3.6 2.8 2.2
2.8 3.3 4.2 3.2 1.5
2.8 3.7 3.1 2.4 2.7
3.0 3.1 2.9 2.3 1.8
-0.3 2.2 6.1 2.1 2.3
-1.2 2.0 7.5 2.4 2.6
-7.0 -2.2 6.2 -6.7 -1.9
-6.2 1.8 10.2 2.9 5.3
2005 7 8 9 10 11 12
2.6 2.0 2.5 2.3 2.5 2.6
3.2 1.7 2.9 2.7 2.8 3.6
2.0 2.2 2.2 2.0 2.0 1.9
2.1 1.9 1.8 1.7 1.9 1.8
2.0 1.4 1.6 1.7 1.1 1.7
2.3 1.6 1.6 1.7 0.9 1.6
-6.6 -9.3 -7.4 -8.5 -7.1 -3.2
3.6 2.7 6.3 3.1 5.6 10.2
2006 1 2 3 4 5 6 7 8 9 10 11 12
2.2 2.0 2.0 2.0 2.3 2.4 2.4 2.7 2.5 2.2 2.1 2.1
2.5 1.6 1.2 1.0 1.8 2.0 1.7 2.7 1.6 0.7 1.0 0.8
2.0 2.3 2.3 2.7 2.7 2.8 2.9 2.8 3.1 3.1 2.9 2.9
1.3 1.3 1.4 1.5 1.8 1.9 2.1 2.1 2.0 2.0 2.1 2.1
2.1 1.7 1.4 1.5 2.7 3.2 2.8 3.4 3.1 1.9 1.9 2.2
2.3 1.8 1.3 1.3 2.8 3.9 3.4 4.0 3.5 1.9 1.9 2.4
-3.6 -4.9 -4.4 -4.0 0.6 1.3 -0.5 2.4 -1.7 -3.6 -2.6 -1.6
10.2 8.5 5.7 6.1 11.3 9.2 7.9 7.5 0.2 -1.4 -0.3 0.6
Source: Korea National Statistical Office
Economic Bulletin
73
12. Employment and earnings See graphs 8-1, 8-2 & 8-3
Economically active persons (thous.) Period
Employed persons (thous.)
Unemployment (%)
All industry earnings (won) (base year=2000) Manufacturing
All industry Manufacturing S.O.C&service 2003 2004 2005 2006
22,957 23,417 23,743 23,978
22,139 22,557 22,856 23,151
4,205 4,290 4,234 4,167
15,967 16,427 16,789 17,181
3.6 3.7 3.7 3.5
2,228,491 2,372,612 2,524,917 -
2,073,992 2,279,724 2,458,022 -
2005
7 8 9 10 11 12
24,072 23,689 23,918 24,056 23,976 23,526
23,184 22,847 23,048 23,186 23,191 22,699
4,233 4,167 4,201 4,241 4,197 4,220
16,931 16,713 16,892 16,966 17,137 17,007
3.7 3.6 3.6 3.6 3.3 3.5
2,496,925 2,461,924 2,759,394 2,413,960 2,282,356 3,349,475
2,450,956 2,404,969 2,655,434 2,370,892 2,097,699 3,504,729
2006
1 2 3 4 5 6 7 8 9 10 11 12
23,340 23,365 23,769 24,088 24,267 24,320 24,270 23,972 24,096 24,253 24,225 23,773
22,471 22,412 22,848 23,242 23,484 23,501 23,447 23,164 23,330 23,463 23,458 22,989
4,201 4,184 4,179 4,188 4,170 4,184 4,180 4,114 4,135 4,183 4,137 4,153
16,893 16,763 16,986 17,186 17,293 17,294 17,303 17,099 17,248 17,294 17,467 17,348
3.7 4.1 3.9 3.5 3.2 3.4 3.4 3.4 3.2 3.3 3.2 3.3
2,865,004 2,451,498 2,481,580 2,504,830 2,356,038 2,685,520 2,646,200 2,607,031 2,796,266 -
2,803,400 2,376,782 2,322,720 2,424,268 2,201,426 2,580,407 2,596,198 2,531,654 2,648,830 -
Y-o-Y change (%) 2003 2004 2005 2006
0.2 2.0 1.4 1.0
-0.1 1.9 1.3 1.3
-0.9 2.0 -1.3 -1.6
0.8 2.9 2.2 2.3
-
9.4 6.5 6.4 -
8.8 9.9 7.8 -
2005
7 8 9 10 11 12
1.9 2.0 1.3 1.5 1.5 0.6
1.9 2.1 1.0 1.2 1.7 0.9
-1.8 -1.4 -2.2 -1.9 -2.5 -1.0
2.6 3.1 2.0 2.4 2.9 2.0
-
5.7 5.1 5.1 6.9 6.5 4.2
6.4 9.6 5.6 10.0 6.7 0.7
2006
1 2 3 4 5 6 7 8 9 10 11 12
1.2 1.3 1.0 1.0 0.9 0.8 0.8 1.2 0.7 0.8 1.0 1.1
1.8 1.5 1.2 1.3 1.2 1.1 1.1 1.4 1.2 1.2 1.1 1.3
-1.2 -1.7 -2.2 -1.9 -1.9 -1.6 -1.2 -1.3 -1.6 -1.4 -1.4 -1.6
3.0 2.5 2.5 2.9 2.5 2.2 2.2 2.3 2.1 1.9 1.9 2.0
-
20.3 -7.7 5.5 5.3 7.9 4.1 6.0 5.9 1.3 -
24.1 -11.8 5.7 4.1 8.1 3.4 5.9 5.3 -0.2 -
Source: Korea National Statistical Office
74
January 2007
13. Financial indicators See graphs 9-1 & 9-4 (period average) Yields (%)
Stock
Period Call rate (1 day)
CD (91 days)
Corporate bonds (3 years, AA-)
Treasury bonds (3 years)
Treasury bonds (5 years)
KOSPI (end-period)
2003 1 2 3 4 5 6 7 8 9 10 11 12
4.3 4.3 4.2 4.2 4.1 4.0 3.8 3.7 3.7 3.8 3.8 3.8
4.7 4.5 4.8 4.6 4.4 4.3 4.2 3.9 3.8 3.9 4.2 4.3
5.5 5.3 5.4 5.4 5.3 5.3 5.7 5.9 5.2 5.2 5.5 5.6
5.0 4.7 4.8 4.6 4.3 4.1 4.4 4.6 4.3 4.3 4.8 4.9
5.2 4.9 4.9 4.8 4.4 4.2 4.6 4.9 4.5 4.5 5.1 5.1
591.90 575.40 535.70 599.40 633.40 669.90 713.50 759.50 697.50 782.40 796.20 810.70
2004 1 2 3 4 5 6 7 8 9 10 11 12
3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.6 3.5 3.5 3.3 3.3
4.3 4.1 3.9 3.9 3.9 3.9 3.9 3.7 3.5 3.5 3.4 3.4
5.7 5.6 5.4 5.3 5.1 4.9 4.8 4.4 4.1 4.0 3.9 3.7
4.9 4.8 4.6 4.5 4.4 4.3 4.2 3.8 3.6 3.5 3.4 3.3
5.2 5.1 4.9 4.9 4.8 4.6 4.5 4.0 3.8 3.7 3.5 3.4
848.50 883.40 880.50 862.80 803.80 785.80 735.30 803.60 835.10 834.80 878.10 895.90
2005 1 2 3 4 5 6 7 8 9 10 11 12
3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.4 3.5 3.7
3.5 3.6 3.6 3.5 3.5 3.5 3.5 3.5 3.7 3.9 4.0 4.0
4.1 4.6 4.5 4.3 4.1 4.2 4.5 4.8 4.9 5.2 5.5 5.5
3.7 4.2 4.0 3.9 3.7 3.8 4.1 4.3 4.5 4.8 5.1 5.1
3.9 4.5 4.3 4.1 3.9 4.0 4.4 4.7 4.8 5.1 5.4 5.3
932.70 1,011.40 965.70 911.30 970.20 1,008.20 1,111.30 1,083.30 1,221.00 1,158.10 1,297.40 1,379.40
2006 1 2 3 4 5 6 7 8 9 10 11 12
3.7 3.9 4.0 4.0 4.0 4.2 4.2 4.4 4.5 4.5 4.5 4.5
4.2 4.3 4.3 4.3 4.4 4.5 4.6 4.7 4.6 4.6 4.6 4.8
5.5 5.3 5.3 5.2 5.1 5.2 5.2 5.1 5.0 4.9 5.1 5.2
5.0 4.9 4.9 5.0 4.8 4.9 4.9 4.8 4.7 4.6 4.7 4.8
5.3 5.0 5.1 5.2 4.9 5.0 5.0 4.8 4.8 4.7 4.8 4.9
1,399.80 1,371.60 1,359.60 1,419.70 1,317.70 1,295.20 1,297.80 1,352.70 1,371.40 1,364.60 1,432.20 1,434.50
Source: The Bank of Korea
Economic Bulletin
75
14. Monetary indicators See graph 9-5 (period average)
Period
(billion won)
Reserve money
M1
M2
Lf
2002 2003 2004 2005
33,579.3 35,754.7 37,272.4 38,785.2
265,042.4 283,397.4 306,842.5 332,902.1
824,227.8 888,988.6 929,640.6 993,960.1
1,092,168.8 1,187,839.8 1,260,547.1 1,348,818.8
2005 7 8 9 10 11 12
38,103.3 38,630.0 39,864.5 39,732.8 39,461.4 40,319.5
346,659.4 346,984.8 347,135.3 339,969.4 307,025.1 318,419.2
1,004,960.2 1,008,802.0 1,008,223.6 1,008,215.2 1,011,582.7 1,021,591.6
1,361,474.7 1,366,592.7 1,371,084.6 1,374,836.2 1,381,692.7 1,393,063.7
2006 1 2 3 4 5 6 7 8 9 10 11
41,336.0 41,655.5 40,991.9 41,190.0 40,734.4 40,715.1 41,973.7 40,287.2 41,500.4 43,199.9 41,507.4
327,542.1 326,548.3 325,711.9 324,222.6 323,908.4 326,949.2 330,267.7 325,958.2 327,648.4 333,597.5 337,666.0
1,027,697.4 1,034,711.9 1,042,293.6 1,048,598.6 1,055,855.4 1,072,886.5 1,082,577.5 1,084,752.6 1,098,444.2 1,110,360.9 1,123,714.6
1,398,707.3 1,407,971.3 1,413,306.8 1,421,447.5 1,430,748.5 1,445,440.3 1,460,729.4 1,468,210.0 1,479,577.9 1,494,767.6 1,510,879.0
Y-o-Y change (%) 2002 2003 2004 2005
14.3 6.5 4.2 4.1
22.5 6.9 8.3 8.5
11.5 7.9 4.6 7.0
12.9 8.8 6.1 7.0
2005 7 8 9 10 11 12
5.6 5.8 6.9 5.2 5.7 7.8
13.3 14.4 12.8 9.7 -1.1 -0.5
7.9 7.7 6.6 6.5 6.6 7.0
7.5 7.6 6.9 6.9 7.2 7.4
2006 1 2 3 4 5 6 7 8 9 10 11
9.0 5.0 7.8 8.6 7.5 7.6 10.2 4.3 4.1 8.7 5.2
1.7 -0.8 -2.7 -3.0 -2.3 -3.0 -4.7 -6.1 -5.6 -1.9 10.0
7.3 7.2 6.6 6.8 7.1 7.7 7.7 7.5 9.0 10.1 11.1
7.2 7.4 7.0 7.4 7.6 7.3 7.3 7.4 7.9 8.7 9.4
P: Preliminary Source: The Bank of Korea
76
January 2007
15. Exchange rates See graphs 9-2 & 9-3 � /US$
� /100¥
� /Euro
Period End-period
Average
End-period
Average
End-period
Average
2002 2003 2004 2005 2006
1,200.4 1,197.8 1,043.8 1,013.0 929.6
1,251.2 1,191.9 1,144.7 1,024.3 955.5
1,012.9 1,119.6 1,012.1 859.9 781.8
999.6 1,029.8 1,058.8 930.7 821.5
1,257.4 1,502.6 1,423.0 1,199.3 1,222.2
1,180.6 1,348.3 1,422.9 1,274.0 1,199.3
2005 7 8 9 10 11 12
1,028.3 1,031.0 1,038.0 1,042.7 1,036.3 1,013.0
1,037.4 1,021.2 1,029.3 1,046.3 1,041.4 1,024.2
915.8 925.6 915.9 900.4 865.4 859.9
927.2 921.8 927.1 910.9 880.1 863.9
1,247.2 1,259.2 1,247.4 1,256.7 1,219.3 1,199.3
1,249.5 1,254.5 1,262.1 1,258.0 1,229.0 1,214.0
2006 1 2 3 4 5 6 7 8 9 10 11 12
971.0 969.0 975.9 945.7 947.4 960.3 953.1 959.6 945.2 944.2 929.9 929.6
987.0 970.2 975.1 954.4 941.4 955.2 950.2 960.7 953.7 954.2 936.2 925.8
824.9 833.8 831.7 828.3 842.2 834.0 830.2 820.3 802.2 803.5 799.0 781.8
854.3 822.4 831.3 814.8 843.0 833.0 821.4 829.7 814.3 803.2 798.0 790.2
1,173.8 1,147.9 1,187.1 1,184.9 1,208.0 1,215.9 1,216.4 1,232.3 1,200.6 1,200.8 1,223.0 1,222.2
1,194.8 1,159.7 1,172.8 1,169.9 1,201.7 1,208.7 1,206.2 1,230.6 1,214.9 1,202.4 1,205.3 1,222.8
Y-o-Y change (%) 2002 2003 2004 2005 2006
-9.5 -0.2 -12.9 -3.0 -8.2
-3.1 -4.7 -4.0 -10.5 -6.7
0.3 10.5 -9.6 -15.0 -9.1
-5.9 3.0 2.8 -12.1 -11.7
7.2 19.5 -5.3 -15.7 1.9
2.1 14.2 5.5 -10.5 -5.9
2005 7 8 9 10 11 12
-12.0 -10.6 -9.6 -7.4 -1.1 -3.0
-10.4 -11.9 -10.3 -8.6 -4.6 -2.6
-12.1 -11.7 -11.4 -15.0 -15.0 -15.0
-12.5 -12.2 -11.3 -13.2 -15.5 -14.7
-11.3 -9.4 -11.9 -12.4 -12.3 -15.7
-12.1 -11.2 -9.9 -12.0 -13.2 -13.8
2006 1 2 3 4 5 6 7 8 9 10 11 12
-5.4 -3.9 -4.7 -5.7 -5.5 -6.3 -7.3 -6.9 -8.9 -9.5 -10.3 -8.2
-4.9 -5.1 -3.2 -5.6 -6.1 -5.5 -8.4 -5.9 -7.4 -8.8 -10.1 -9.6
-16.7 -12.9 -12.7 -12.3 -9.3 -10.1 -9.3 -11.4 -12.4 -10.8 -7.7 -9.1
-15.1 -15.6 -13.2 -13.6 -10.3 -10.4 -11.4 -10.0 -12.2 -11.8 -9.3 -8.5
-12.2 -14.0 -10.3 -8.4 -3.5 -1.8 -2.5 -2.1 -3.8 -4.5 0.3 1.9
-12.4 -13.1 -11.7 -10.6 -5.5 -1.7 -3.5 -1.9 -3.7 -4.4 -1.9 0.7
Source: The Bank of Korea
Economic Bulletin
77
Editor-in-Chief Kim, Young-Kwa (MOFE) Editorial Board Song, Kyung-Jin (MOFE) Kim, Dong-Yule (KDI) Shim, Jae-Hak (KDI) Coordinators Kim, Min-Hyae (MOFE) Baek, Yoon-Jin (MOFE) Assistant Editors Chang, Jae-Yong (MOFE) Kang, Ji-Eun (KDI) Kim, Jin-Mi (KDI) Baek, So-Myung (KDI)
Useful Internet Websites Economy-related Websites Recommended
Ministry of Finance and Economy http://english.mofe.go.kr Ministry of Commerce, Industry and Energy http://english.mocie.go.kr Ministry of Planning and Budget http://www.mpb.go.kr/english.html Financial Supervisory Commission/Financial Supervisory Service http://www.fsc.go.kr/eng Fair Trade Commission http://www.ftc.go.kr/eng Ministry of Labor http://english.molab.go.kr Bank of Korea http://www.bok.or.kr Korea National Statistical Office http://www.nso.go.kr/eng/index.html
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