HKIR2014-27 Korea Economy and Industry Overview …2014/02/08 · Korea Economy and Industry...

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Korea Economy and Industry Overview

The Bank of Tokyo-Mitsubishi UFJ. Ltd.

Corporate Research Division (Hong Kong)Aug 2014

Korea Economy and Industry Overview | August 20141

Table of contents

1．Overview of the Korea Economy

2．Korean Economic Indicator and Outlook

3．Trends of Major Industry in Korea

4．Conclusion

Korea Economy and Industry Overview | July 20142

1．Overview of the Korea Economy


(at chained 2010 year prices, original series)

2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

2.4 2.1 2.1 2.1 2.7 3.4 3.7 3.9 3.6Real GDP

Growth (YoY, %)

(Note) 1. Preliminary data was used from 1Q13~1Q14 and advanced estimate data was used for 2Q14 2. Due to the change of System of National Accounts, restated GDP figures were used(Source) BOK

3

GDP Growth Trend ~ Improve moderately after the slowdowns supported by manufacturing and export

Korea economy improved by turning around from the slowing down trend since 2010.

Real GDP growth posted 3.0% YoY in 2013 after the two consecutive years of slowdowns from 6.5% YoY in 2010 to 3.7% YoY and 2.3% YoY in 2011 and 2012 respectively.

Improvement of GDP was supported by solid growths in manufacturing and export.

Annual GDP Trend ~ Turnaround from the slowing down trend

Quarterly GDP Trend ~ Maintained to grow but at a slower pace in 2Q14

The pace of quarterly GDP growth in year-on-year maintained to grow but its pace decelerated in 2Q14. It was the first slowdown since 3Q12.

During the period, export was a major driver in economic growth, while weak private spending affected by a ferry accident (Note)

limited the growth.

1. Overview of the Korea Economy

767876 920 966 1,043 1,104 1,152

1,265 1,333 1,377 1,428

721603 651

0

300

600

900

1,200

1,500

1,800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

2

4

6

8

10(KRW trillion) (YoY, %)

Real GDP growth rate (RHS)

Nominal GDP

(Note) 1. Preliminary data was used for 2013 2. Due to the change of System of National Accounts, GDP figures were restated from 2000(Source) Bank of Korea ("BOK")

3.0%

(Note) A ferry sinking accident in mid-April in Korea resulted in more than 300 dead or missing


Regarding production activity, manufacturing accounted for 29.4% of total real GDP followed by retail and food hospitality (10.5%) in 2Q14. Besides, finance & insurance and construction accounted for 5.6% and 4.2% respectively of total real GDP during the same period.

In 2Q14, quarterly real GDP growth in YoY was largely supported by a favorable manufacturing growth. However, slowdown in construction as well as retail and food hospitality led to a decelerating trend.

Contribution to Real GDP Growth by Major Production Sectors

Contribution to Real GDP Growth by Production Activity ~ Recent GDP growth was due to a stable manufacturing growth, while the others mostly eased down


▲4

▲2

0

2

4

6

8

10

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Manufacturing Construction Retail and Food HospitalityFinance and Insurance Others GDP

(Note) 1. Preliminary data was used from 1Q13~1Q14 and advanced estimate data was used for 2Q14 2. Others include real estates & leasing, public admin & defense, information and telecommunication, educational service, business service and etc 3. Due to the change of System of National Accounts, restated GDP figures were used(Source) BOK

(YoY, %) (at chained 2010 year prices, original series)


Contribution to Real GDP Growth by Expenditure Activity ~ Recent GDP growth was due to contribution by export despite weakened private consumption

Regarding expenditure, private consumption accounted for 46.9% of total real GDP in 2Q14 followed by construction investment (15.2%), government consumption (14.4%) and plant & equipment investment (9.7%). Besides, net export shared 8.5% of total real GDP as export accounted for 57.9%, while import accounted for 49.4%.

In 2Q14, quarterly real GDP growth in YoY was backed by a relatively solid contribution from export and a pick-up on investment in plant and equipment. However, the growth pace was constrained by soft domestic demand such as slowed-down investment in construction and weakened private consumption hit by a ferry disaster.

Contribution to Real GDP Growth by Expenditure Activity


▲15

▲10

▲5

0

5

10

15

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Private consumption Government consumption Construction investment

Plant and equipment investment Export of goods and service Import of goods and service

Adjusted others GDP

(YoY, %) (at chained 2010 year prices, original series)

(Note) 1. Preliminary data was used from 1Q13~1Q14 and advanced estimate data was used for 2Q14 2. Others include intangible fixed asset investment, other gross capital formation and statistical discrepancy 3. Due to the change of System of National Accounts, restated GDP figures were used(Source) BOK


2. Korean Economic Indicator and Outlook


0

10,000

20,000

30,000

40,000

50,000

60,000

05 06 07 08 09 10 11 12 13 14▲60

▲40

▲20

0

20

40

60

Export YoY (RHS)

(USD million) (%)

(Source) CEIC

7

Export Condition ~ Improved moderately along with demand improvement from developed economies such as US and EUKorea’s total export grew moderately

by 2.5% YoY to USD 283,324 million in 1H14.

By product, semiconductor accounted for 10.3% of total export followed by petroleum (9.2%), automobile(9.0%), general machinery (8.5%) and petrochemical (8.4%).

By area, export to China accounted for 24.5% of total export followed by US (12.0%), ASEAN-5 (10.5%), EU(9.7%)and Japan(5.7%).

Export growth was driven by demand improvement by developed economies. While export to China registered a marginal drop due to slowdown in China economy.

In relation to currency exchange rate, persistent appreciation of KRW against USD limited export growth.

Export Growth by Area

Export Growth by Area Fx Rate (KRW/USD and JPY/USD)


400

600

800

1,000

1,200

1,400

1,600

05 06 07 08 09 10 11 12 13 1440

60

80

100

120

140

160

(Source) Bloomberg

(KRW/USD) (JPY/USD)

JPY/USD(RHS)

KRW/USD

(YoY, %)2005 2006 2007 2008 2009 2010 2011 2012 2013 1H13 1H14

Total 12.0 14.4 14.1 13.6 ▲13.9 28.3 19.0 ▲1.3 2.1 0.5 2.5China 24.4 12.2 18.0 11.5 ▲5.1 34.8 14.8 0.1 8.6 9.7 ▲0.1US ▲3.5 4.5 6.0 1.3 ▲18.8 32.3 12.8 4.1 6.0 2.1 8.1ASEAN-5 9.1 12.8 17.7 23.7 ▲17.8 39.1 32.8 10.1 7.5 11.3 3.0EU 15.4 11.0 13.4 6.3 ▲20.2 14.8 4.1 ▲11.4 ▲1.0 ▲3.7 11.2Japan 10.7 10.4 ▲0.6 7.1 ▲22.9 29.4 40.8 ▲2.2 ▲10.7 ▲11.6 ▲5.4(Note) ASEAN-5: Indonesia, Malaysia, Philippines, Thailand, and Vietnam(Source) CEIC


Unemployment Rate and CPI ~ Unemployment rate stabilized and CPI slightly rose but remained at a low levelOverall unemployment lowered

from 3.9% in Mar14 to 3.5% in Jun14. Meantime, youth unemployment rate stayed at a high level.

Overall unemployment rate is projected to remain low due to economic growth and government plan to encourage employment of female and the elderly.

CPI inflation slightly went up by 1.6% YoY during 2Q14, despite at a low zone, affected by recent rise in oil price due to geographic tension.

CPI inflation is expected to rise modestly due to improvement in domestic demand and overall job market. However, it may remain at a low level affected by supply side such as projected stable oil price along with appreciation of KRW.

Unemployment Rate and CPI Inflation


0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(%)

Unemployment rate

CPI inflation(YoY)

Core CPI inflation(YoY)

(Note) Core CPI excludes oil and agricultural products(Source) Korean Statistical Information Service ("KOSIS")


KOSPI Index ~ KOSPI rose due to positive market response to continuous low interest rate and relatively eased concerns over China economy The total market capitalization

posted KRW 1,197 trillion as of end Jun 2014 from KRW 431 trillion in early-2005. KOSPI index rose recently and reached 2,000 level in Jun 2014.

The recent upward trajectory was owing to positive market response as US Fed implied to keep the interest rate low. Also, the concern over possibility of hard landing for China economy relatively eased.

KOSPI Index Trend


0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(Source) Korea Stock Exchange

(Jan 1980=100)


70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 201494

96

98

100

102

104CCI (Coincident

Composite Index)

LCI (Leading Composite Index) CLI (Composite

Leading Index)

20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CSI

(Note) 1. BSI ~ Business Sentiment Index; CSI ~ Consumer Sentiment Index 2. BSI, CSI: above 100 ~ number of positive responses exceeds number of negative responses; below 100 ~ number of positive responses is less than number of negative responses(Source) BOK

BSI (Manufacturing)

BSI (Industry total)

10

Sentiment and Economic Composite Indices ~ Rising trends of leading indices expect Korean economy to improve moderatelyBusiness Sentiment Index (“BSI”)

was in a declining trend in 2Q14. Consumer Sentiment Index (“CSI”) slightly faltered, but it stayed over 100.

The recent decline in BSI was due to rising concerns by export companies over KRW appreciation and overall weakened domestic demand affected by ferry accident.

In terms of leading indicators, LCI maintained its upward trend and CLI also continued to climb up above 100, representing an expansion mode.

Sentiment Index

Economic Composite Index

(Note) 1. LCI, CCI indices: Average 2010=1002. CLI (RHS) Index: above 100 and increasing ~ expansion; above 100 and decreasing ~ downturn;

below 100 and decreasing ~ slowdown; below 100 and increasing ~ recovery (Source) KOSIS, OECD



Outlook of Korea Economy ~ Korea GDP may maintain to grow in line with world economy growth and better domestic condition by stimulus planGeneral consensus forecasts Korea

economy to grow further in 2014-15 despite BOK’s revising down on its projections. The adjustment factored in world GDP, recently being marked down, and delay on improvement on domestic demand.

Korea GDP would be benefited from still growing world economy as it is export driven economy.

In addition, Korea government recently unveiled big stimulus plan targeting, especially slowed domestic condition. The stimulus plan may embrace possible measures to bolster economy (i.e. extra budget, easing LTV and Debt-to-Income ratios, tax measures to boost investment, dividend and wage). Also, BOK lowered the interest rate from 2.5% to 2.25%.

Amid Korea economy is forecast to grow further, economic conditions of major trading countries and recent KRW appreciation should be monitored. So as for effectiveness of stimulus plan on domestic demand.

GDP Growth Forecast


(YoY, %)

2014 2015 2014 2015 2014 2015

World 3.2 3.3 3.9 3.4 4.0 3.4 3.9

Korea 3.0 3.8 4.0 3.7 3.8 4.0 4.2

China 7.7 7.5 7.4 7.4 7.1 7.4 7.3

US 1.9 1.8 3.2 1.7 3.0 2.6 3.5

Euro area ▲0.4 1.1 1.5 1.1 1.5 1.2 1.7

Japan 1.5 1.3 1.2 1.6 1.1 1.2 1.2

BOK (as of Jul-14) IMF (as of Jul-14) OECD (as of May-14)2013

(Note) 1. Euro area: BOK and IMF ~ Eurozone 17 countries; OECD ~ Euro area 15 countries 2. Data for Korea by IMF was based on the forecasted figures as of Apr-14(Source) BOK, IMF, OECD


3． Trends of Major Industry in Korea


0

50

100

150

200

250

2010 2011 2012 2013 1H13 1H140

10

20

30

40

50China (incl. Hong Kong) ASEANEurope USCentral & South America JapanYoY

(USD billion)

(Export to major areas) (RHS)

(YoY, %)

13

Electronics ~ Slower growth is expected from the high base, positive growth might be supported by still stable demand in major products

Production and export of electronics industry grew slowly by 1.7% and 3.8% YoY respectively in Jan-May 14.

In 1H14, demand from the largest market China was still steady albeit slower than before. While, Europe rose significantly.

Export of semiconductor grew further by 10.6% YoY largely due to high DRAM price, while flat panel display remained weak. Export of handset remained stable despite at a slower pace by 12.5% YoY. Demand on high-end smartphone with new model underpinned handset sales.

Looking forward, electronics industry would grow steadily, but at a slower rate from its high base. There are downward factors such as possible stabilization of DRAM price, demand slowdown in premium smartphone coupled with challenge by Chinese players and KRW appreciation. However, forecast mild correction in DRAM price under the supplier-driven structure as well as expanding product mix in growing low-end smartphone would support industry to maintain positive growth.

Electronics Industry Production Export by Major Area

Export Major Products DRAM and NAND Price Trend

(Note) 1. Production ~ The sum of ICT devices and software2. Export ~ Export value out of domestic production,

Domestic ~ Domestic sales out of domestic production 3. Annual average forex rate was used for export

(Source) KAIT, KEA

(Note) 1. Due to new classification of statistics, the data from 2012 wasrestated

2. ASEAN ~ Mainly Singapore, Thailand, Indonesia and Malaysia(Source) NIPA

3. Trends of Major Industry in Korea

0

20

40

60

80

05 06 07 08 09 10 11 12 13

SemiconductorFlat panel displayHandset

(USD billion)

(Note) Due to the statistics reclassif ication, handset data from 2012 includes handset parts (Source) KEA, NIPA, KAIT

1H13 1H140

1

2

3

4

11 12 13 140

2

4

6

8

DRAM (2GB) NAND (RHS)

(USD) (USD)

(Source) Bloomberg

0100200300400500

05 06 07 08 09 10 11 12 13▲10010203040

Export DomesticYoY (Production) (RHS) YoY (Export) (RHS)

(KRW trillion) (YoY, %)

Jan~M ay Jan~M ay1 3 1 4


05

101520253035404550

07 08 09 10 11 12 13 14▲60▲40▲20020406080100120140

Commercial Vehicle (CV) Production: 20 (1H14)Passenger Vehicle (PV) Production: 214 (1H14)YoY Grow th (CV Production): 3.4 (1H14) (RHS)YoY Grow th (PV Production): 2.5 (1H14) (RHS)

(10,000 units) (YoY, %)

(Source) CEIC

14

Automobile ~ Mild improvement is expected in line with possible small growths in domestic and export sales

Automobile production in Korea rose by 2.6% YoY to 2.34 million units in 1H14 due to demand recovery.

Domestic sales were stimulated by new models and continuous demand for SUVs.

Export in unit grew at a low rate due to weakened price competitiveness affected by KRW appreciation and a withdrawal of Chevrolet by GM Korea in Europe. Better export growth in value was led by export increase of high-end cars.

Looking forward, domestic production may grow at a mild pace. Modest domestic sales might be backed by pent-up demand and upcoming new models. Export may rise moderately due to demand in major markets. Also, FTA and Renault Samsung-Nissan alliance to produce Nissan Rogues for overseas markets may support export. Continuously growing overseas production may limit export growth. There is a need to monitor development of recent wage negotiation and KRW appreciation.

Domestic Production by Vehicle Type

Export by Area

Production and Sales

Global Sales by Hyundai-Kia


(10,000 units)

(YoY, %) (YoY, %) (YoY, %) (YoY, %)2005 370 6.6 114 4.5 259 8.7 74 78.72006 384 3.8 116 1.9 265 2.4 101 35.92007 409 6.4 122 4.7 285 7.5 116 15.12008 383 ▲6.4 115 ▲5.3 268 ▲5.7 146 25.42009 351 ▲8.2 139 20.7 215 ▲19.9 190 30.52010 427 21.6 147 5.1 277 29.0 260 37.02011 466 9.0 147 0.6 315 13.7 314 20.62012 456 ▲2.0 141 ▲4.3 317 0.6 364 15.82013 452 ▲0.9 138 ▲1.9 309 ▲2.6 411 13.01H13 228 ▲4.1 68 ▲2.5 159 ▲6.6 207 19.51H14 234 2.6 71 5.2 160 0.7 219 6.1

production sales sales productionOverseasDomestic Domestic Export

(Note ) Domestic sales ~ Units sold by Korean car makers(Source) KAMA

(Source) KAMA

0

10

20

30

40

50

60

70

07 08 09 10 11 12 13▲40

▲20

0

20

40

60

80

100US Middle EastEU Other EuropeCentral & S America AsiaOthers YoY (Total)

(USD billion) (YoY, %)

1H13 1H14

0

200

400

600

800

1000

05 06 07 08 09 10 11 12 13 1H13 1H140

5

10

15

20

25

Sales by Hyundai and Kia Motors YoY (RHS)(Note) Sales units were based on the shipment(Source) Hyundai Motor, Kia Motors, News articles

(10,000 units) (YoY, %)


01020304050607080

07 08 09 10 11 12 13 14▲30▲20▲1001020304050

Ethylene Production: 420 (1H14)YoY Growth: 1.5 (1H14) (RHS)

(10,000 tons) (YoY, %)

(Source) CEIC

15

Petrochemical ～ Modest improvement is expected under likely mild recovery in demand from developed economies

Ethylene production grew at a slower rate by 1.5% YoY to 4.2 million tons in 1H14. Production of major petrochem sectors also registered a small positive rise by 1.8% YoY in Jan-May 14.

In 1H14, petrochem production managed to maintain a positive growth from a modest improvement in domestic demand. While export remained soft largely due to eased demand from China and ASEAN. Also, price decline in some major export products, affected by increase in global supply, caused export drop in value.

Looking forward, the industry may improve modestly. Domestic demand is likely to be stable and export might slightly recover attributed to demand from developed economies. Globally, as ethylene capacity expansion is to be limited in the near term, ethylene market would be stable. While, cautious views are needed for some products expecting large capacity expansion (i.e. Propylene PX and terephthalic acid etc.).

Ethylene Production Production & Export of Major PetrochemSectors

Export of Petrochemical Products Raw Materials and Ethylene Price Trend


0

10

20

30

40

50

60

05 06 07 08 09 10 11 12 13▲20

▲10

0

10

20

30

40

Export of petrochemical product YoY (RHS)(Source) MOTIE, MKE

(USD billion) (YoY, %)

1H13 1H14

0

30

60

90

120

150

05 06 07 08 09 10 11 12 13 140

400

800

1,200

1,600

2,000

Brent crude oil Naphtha (RHS)Ethylene fob Korea (RHS)

(Source) Bloomberg

(USD/bbl) (USD/MT)

01,0002,0003,0004,0005,0006,0007,000

05 06 07 08 09 10 11 12 130

1,000

2,000

3,000

4,000

5,000

Olefins BTXIntermediaries Synthetic resinsSynthetic f ibers raw materials Synthetic rubbersExport (RHS)

(10,000 tons) (10,000 tons)

(Source) KPIA

Jan~M ay1 3

Jan~M ay1 4


0

100

200

300

400

500

600

700

05 06 07 08 09 10 11 12 13 14▲30

▲20

▲10

0

10

20

30

40

Crude Steel Production: 3,608 (1H14)YoY Growth: 9.8 (1H14) (RHS)

(10,000 tons) (YoY, %)

(Source) CEIC

16

Steel ~ Soft improvement is expected due to a modest growth in demand yet structural global oversupply condition may remain

Steel industry recovered due to mild improvement in demand after two consecutive years of contractions.

In 1H14, from low base, crude steel production grew by 9.8% YoY. Export of finished steel products in value rose by 6.9% YoY backed by demand recovery in major areas except ASEAN.

Looking forward, the industry may improve modestly. However, the momentum would be rather still soft to gain an actual growth. This is because of continuous global oversupply and slow growth in global demand under the tighter competition. Accordingly, export might rise at a smaller rate. Domestic demand would grow modestly as demand from automobile might continue to grow at a mild pace, while demand from major downstream industries may remain relatively tepid.

Crude Steel Production

Raw Material & Steel Price Index Trend

Production and Consumption of Steel Products

Export of Steel Products by Area


0

2,000

4,000

6,000

8,000

05 06 07 08 09 10 11 12 13(e)▲40

▲20

0

20

40

ProductionApparent consumptionYoY Growth (Production) (RHS)YoY Growth (Apparent consumption) (RHS)

(10,000 tons) (YoY, %)

(Note) Estimated data was used for 2013(Source) KOSA

0

200

400

600

800

1,000

1,200

2009 2010 2011 2012 2013 20140

50

100

150

200

250

300

Iron ore (RHS)

Steel price(World)

(USD/MT) (USD/MT)

(Source) Bloomberg

0

10,000

20,000

30,000

40,000

05 06 07 08 09 10 11 12 13-

2,000.0

4,000.0

6,000.0

8,000.0

Total export Japan (RHS)China (RHS) US (RHS)ASEAN-10 (RHS) EU-27 (RHS)

(USD million) (USD million)

(Source) KOSA

1H13 1H14


Shipbuilding ~ Industry may remain subdued from delay on recovery of shipping industry and growing competition in contracting

New ship completion declined by ▲14.3% YoY to 5.3 million tons in 1H14. The sharp drops continued in container, oil tanker and bulker. While, LPG/LNG carrier kept rising by 28.1% YoY.

Orderbook by Korea rose due to buoyant new contracts in last year. Global new contracts eased and dropped to low level due to lack of demand recovery. In line with it, contracts by Korea fell by ▲25.9% YoY in 1H14.

Looking forward, new ship completion may remain weak. Amid weak market condition, Korea may maintain its competitiveness in LPG/LNG carrier and very large-sized container despite growing competition with China and Japan. Therefore, it could be benefited to a certain extend as demand of LPG/LNG carrier might grow due to increase in shale gas production and continuous demand for natural gas. As a whole, shipbuilding industry is projected to be subdued.

Ship Completion by Vessel


0

20

40

60

80

100

120

140

160

180

05 06 07 08 09 10 11 12 13 14▲80

▲40

0

40

80

120

160

200

240

280

Oil Tanker Completion: 22.2 (1H14) LPG/LNG & General Cargo Carrier Completion: 292.5 (1H14)

Bulk Carrier Completion: 22.1 (1H14) Container Ship Completion: 196.2 (1H14)

YoY (Oil tanker): ▲68.0 (1H14) (RHS) YoY (LPG/LNG & General Cargo Carrier): 28.1 (1H14) (RHS)

YoY (Bulk Carrier): ▲67.1 (1H14) (RHS) YoY (Container Ship): ▲23.7 (1H14) (RHS)

(Source) CEIC

(YoY, %)(10,000 tons)


Retail ~ Modest improvement is likely supported by sentiment recovery with a hope of government’s stimulus plan

Retail sales grew 2.3% YoY to KRW 177.0 trillion in 1H14. Despite growing, the pace was softer than expected given continuous accelerating GDP growth in pervious quarter and its low base. This was due to dampened spending affected by ferry disaster.

For sales by major sector in 1H14, most sectors posted slow results. Large discount store recovered, but modestly despite a slump last year. Department store declined. It was due to spending contraction affected by ferry accident. Meantime, not-in-store sales maintained a relatively steady growth.

Looking forward, total retail sales may rise modestly. Although government’s stimulus plan to boost domestic demand could take some time to be materialized, spending sentiment may improve and support private spending to grow slowly. One of the giant retailers E-mart’s entry in convenience store may intensify competition and give pressure on profitability on this sector.

Retail Sales and Growth Trend Regulation on the large discount storeNov-11 Approval on the regulation

- Location restriction on new storesDec-11 Approval on the reform

- Restriction on the operating hour and business days (2-day holiday per month) for large discount stores and super supermarket

Apr-12 Enforcement of the reform

Provisional injunction on execution in several cities

Oct-12 Voluntary agreement by retailers on the business days (2-day holiday per month)

Nov-12 Initiative of the tighter reform on operating hour and business days

Dec-12 Enforcement of voluntary holiday Apr-13 Enforcement of the tighter reform

- 2-day holiday per month should fall on legal holiday (eg. Sunday or other legal holiday of the month)

(Source) Various information

Growth Rate by Major Sector


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

07 08 09 10 11 12 13 14▲5

0

5

10

15

20

25

30

Retail Sales: 176,972 (1H14)YoY Growth: 2.3 (1H14) (RHS)

(KRW billion) (YoY, %)

(Source) CEIC

▲10

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 1H13 1H14Large Discount Store Not-in-store SupermarketDepartment Store Convenience Store

(Source) CEIC

(YoY, %)


4. Conclusion


Outlook of Korea Economy and Major Industry Korea economy may continue to grow although the accelerating momentum on GDP growth has slowed in 2Q14 due to

lackluster consumer spending affected by ferry accident. Amid export may continue to rise, domestic demand is expected to

slowly regain improving trend.

Export would continue to grow as global economy is projected to maintain a moderate pace of recovery albeit recent downward

adjustment. In line with global economy growth mainly led by advanced economies, export by Korea may rise further and

support Korea GDP growth. Meantime, in order to check downside possibility on export, development of KRW appreciation and

economic conditions of major trading countries should be closely monitored.

Domestic demand is likely to resume its upward trend. Recently announced government’s stimulus plan is aiming at spurring

lackluster private spending due to unexpected ferry accident. The comprehensive stimulus package along with lowered interest

rate is expected to revive domestic demand and spending sentiments. In line with the effectiveness of the stimulus plan,

private spending and investment in plant and equipment may improve slowly.

Regarding major industry in Korea, most industries may improve in the near term, while shipbuilding is likely to remain

subdued. Steel industry may slightly improve after the sluggish market condition in 2012-13. Electronics would grow at a

slower pace due to possible price correction in DRAM and demand slowdown in smartphone. Automobile might register a mild

growth along with modest improvement in domestic demand and export. However, the progress on recent wage negotiation in

automobile industry should be monitored. Petrochemical is likely to improve at a modest pace supported by recovery in export.

Retail may also improve due to better spending sentiment affected by government’s stimulus plan.

4. Conclusion


This report is intended only for information purposes and is not intended to constitute an offer or solicitation to buy or sell securities or any other products. Contents of the report are information as at publish date and are subject to change without notice. This report has not been prepared to provide legal, taxational, financial, market-judgmental, or any other advises on propriety of any transactions. In taking any action, each reader is requested to act on the basis of his or her own judgment upon consulting certified lawyers, accountants or other professionals regarding the accuracy, validity and reliability of information appeared in this report.Bank of Tokyo-Mitsubishi UFJ is regulated by the Financial Services Authority.No part of this publication may be reproduced, stored in a retrieval system or transmitted without the prior written permission of The Bank of Tokyo-Mitsubishi UFJ Limited.

Copyright © 2014 The Bank of Tokyo-Mitsubishi UFJ, Ltd. All rights reserved.

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The Bank of Tokyo-Mitsubishi UFJ, Ltd.Corporate Research Division (Hong Kong)6/F., AIA Central, 1 Connaught Road Central, Hong Kong

[Contact] Jessica H.K. KIM ([email protected])

HKIR2014-27 Korea Economy and Industry Overview …2014/02/08 · Korea Economy and Industry...

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