Professional Documents
Culture Documents
Republic of Korea
Economic Bulletin
Policy Issues
New national accounting system to take hold in three years 42
Statistical Appendices 51
The Green Book
Current Economic Trends
Overview
The Korean economy continued a recovery track, as major economic indicators such as
production, domestic demand, exports, and employment showed steady improvement amid
stabilizing prices.
Mining and manufacturing production in February rose 3.6 percent month-on-month and
19.1 percent year-on-year, thanks to robust exports and domestic demand. Service output
improved 3.1 percent month-on-month and 7.1 percent year-on-year in line with an increase
in educational services and information & communication services.
Consumer goods sales increased 1.8 percent month-on-month and 12.9 percent year-on-year
in February, as the lunar new year holidays and corporate incentive payment positively
affected sales of durable and non-durable goods.
The total number of workers hired in February gained 125,000 year-on-year, led by an
employment increase in the manufacturing and service sectors. The employment rate
(seasonally adjusted) posted 58.3 percent, adding 0.1 percentage point month-on-month,
while the unemployment rate (seasonally adjusted) landed at 4.4 percent, shedding 0.4
percentage points.
Exports jumped 35.1 percent year-on-year in March, helped by the recovering global
economy. Imports, backed by a hike in raw materials and capital goods, soared 48.4 percent
year-on-year.
The consumer price increase in March stabilized at 2.3 percent, as manufactured goods
prices and service fees remained steady while prices of petroleum, agriculture, livestock and
fishery products went up.
In March, the financial market saw stock prices increase and foreign exchange rates fall,
backed by foreign investors’ net buying of domestic stocks amid easing concerns over the
Greek fiscal crisis and rising expectations of global economic recovery.
To sum up, although the Korean economy stays on an upward track amid the global
economy steadily recovering, external uncertainties still exist from fiscal difficulties in some
European countries, discord between the US and China over trade imbalance, and rising
prices of raw materials including oil and steel.
The Korean government, to achieve a secure economic recovery, will hold on to current
policies, while renewing its efforts to create jobs and support the working class. On the other
hand, the government will examine more closely any possible risks at home and abroad, and
steadily work towards improving Korea’s economic structure, with on-going corporate
restructuring among others.
Economic Bulletin 3
1. Global economy
The global economy has been recovering moderately, as consumption, production, and
employment improved in the US, China, and Asian developing countries. However, recovery
of the eurozone economy is still slow, due to growing concerns about Europe’s fiscal deficit
amid Portugal’s sovereign credit rating cut on March 24 and Iceland’s on March 31.
US
US real GDP grew 5.6 percent (annualized q-o-q, final) in the fourth quarter of 2009, while
consumption and employment increased from the beginning of 2010. The economic recovery
clearly took hold as industrial production and retail sales expanded in February from the
previous month and the ISM manufacturing index hit a six-year high of 59.6.
The US housing market was negatively affected in February by the cold wave and the Fed’s
MBS (Mortgage-Backed Security) purchase expiration on March 31, as existing and new
home sales fell month-on-month by 0.6 percent and 2.2 percent, respectively.
Job markets improved in March, as the unemployment rate stayed flat at 9.7 percent and
non-farm payroll increase reached an all-time high of 162,000 since March 2007.
The Federal Reserve announced in the Federal Open Market Committee (FOMC) on March 16
that the Fed would maintain the target range for the federal funds rate at zero to 0.25
percent, and close all the remaining special liquidity facilities, excluding TALF (Term Asset-
Backed Securities Loan Facility) scheduled to end on June 30.
4 April 2010
1-1 US GDP (q-o-q, annualized rate)
Source: US Department of Commerce
Economic Bulletin 5
China As the Chinese economy saw domestic demand continue to increase and exports grow
substantially, the consequent increase in liquidity fueled concerns about hikes in real estate
and consumer prices. The Chinese government announced in the National People’s
Congress on March 5 that it would maintain its “proactive fiscal policy and moderately easy
monetary policy,” thereby expanding domestic demand.
Japan
Japan’s economy grew 0.9 percent quarter-on-quarter in the fourth quarter of 2009, staying
on a slightly upward track, as exports and domestic consumption improved. The
unemployment rate remained unchanged at 4.9 percent in February, showing signs of
stabilizing job markets, while consumer prices continued to decline.
(Percentage change from previous period)
2008 2009 2010
Annual Q4 Annual Q1 Q2 Q3 Q4 Jan Feb
Real GDP -0.7 -2.7 -5.2 -3.6 1.5 -0.1 0.9 - -
Industrial and mining production -3.4 -11.3 -22.3 -22.1 8.3 7.4 4.5 2.7 -0.9
Retail sales (y-o-y, %) 0.3 -1.5 -2.2 -3.9 -0.9 -3.4 -0.7 2.3 4.2
Exports (y-o-y, %) -3.5 -23.1 -33.1 -46.9 -38.5 -34.4 -8.0 40.9 45.3
Consumer prices (y-o-y, %) 1.4 1.0 -1.4 -0.1 -1.0 -2.2 -2.0 -1.3 -1.1
Source: Japan's Statistics Bureau and Statistics Centre
Eurozone
Eurozone’s economic recovery was delayed by continuing low employment which reached
10.0 percent in February, amid uncertainties still existing including Portugal’s sovereign
credit rating cut. Greece’ sovereign debt concerns were relieved to some extent, as European
leaders agreed to provide a joint Europe-IMF bailout to Greece at the EU summit held on
March 25-26.
6 April 2010
1-4 China’s GDP and fixed asset investment
Source: National Bureau of Statistics of China
Economic Bulletin 7
2. Private consumption
Private consumption (preliminary GDP) in the fourth quarter of 2009 increased 0.4 percent
quarter-on-quarter and 5.8 percent year-on-year.
Consumer goods sales in February 2010 was up 1.8 percent month-on-month, due to brisk
sales of durable and non-durable goods, while jumping 12.9 percent year-on-year.
On a month-on-month basis, both durable goods sales such as home appliances and
computer & communications devices and non-durable goods sales such as vehicle fuels
expanded 3.4 percent and 2.0 percent, respectively, whereas semi-durable goods sales fell
1.4 percent.
On a year-on-year basis, consumer goods sales picked up due to a low base effect from the
same period of the previous year and in particular, an increase in durable goods sales such
as automobiles.
Sales at department stores continued an upward march for the tenth consecutive month
thanks to the lunar new year holidays, while those at large discounters rebounded
substantially.
8 April 2010
2-1 Private consumption
Source: The Bank of Korea (national accounts)
Economic Bulletin 9
Consumer goods sales in March, while increasing year-on-year, is projected to slow down
from a month earlier, given low estimates of advanced indicators such as retailers’ sales,
bad weather conditions and a high base effect from the previous month.
Domestic credit card spending was up 19.1 percent year-on-year, slightly decelerating from
the previous month.
Sales at department stores and large discounters fell sharply due to a drop in bargain sale
days.
Domestic sales of Korean automobiles remained brisk, despite the expiration of the tax
break for new car purchases at the end of 2009, while gasoline sales continued to rise for a
second consecutive month in March.
10 April 2010
2-4 Department store and discount store sales (current value)
Source: Ministry of Knowledge Economy (monthly retail sales)
Economic Bulletin 11
3. Facility investment
Facility investment (preliminary GDP) in the fourth quarter of 2009 posted a quarter-on-
quarter increase of 5.3 percent, and a year-on-year gain of 13.3 percent.
Facility investment in February 2010 rose 7.8 percent month-on-month and 18.0 percent
year-on-year on the back of an increase in machinery investments including those in semi-
conductor equipment.
(Percentage change from same period in previous year)
2007 2008 2009 2010
Annual Annual Annual1 Q1 Q2 Q3 Q4 Dec Jan1 Feb1
Facility investment 8.2 -3.0 -8.0 -17.9 -12.9 -10.0 10.2 21.1 19.4 18.0
(Seasonally adjusted) 2
- - - -10.2 5.6 2.4 13.9 5.9 -10.6 7.8
- Machinery 7.5 -4.2 -12.9 -22.1 -18.9 -17.0 8.8 19.5 13.5 25.7
- Transportation equipment 11.3 2.1 12.0 0.1 11.8 20.0 15.5 27.4 43.2 -5.5
Domestic machinery orders 20.6 -13.8 -11.8 -35.5 -17.7 3.4 20.0 21.2 11.2 -3.1
- Public -11.4 5.0 61.7 150.8 29.9 280.2 -27.2 -44.5 -27.1 -79.4
- Private 24.5 -15.5 -19.9 -44.8 -22.3 -16.0 35.2 52.4 17.8 30.9
- Machinery imports 22.1 6.4 -16.6 -27.9 -27.4 -15.9 -7.2 24.7 34.2 33.6
Facility investment 1.7 -1.7 -4.0 -19.1 -8.9 1.2 12.8 31.5 34.4 15.0
adjustment pressure3
1. Preliminary
2. Percentage change from previous period
3. Production growth rate minus production capacity growth rate in the manufacturing sector (%p)
Sources: Statistics Korea & The Korea International Trade Association
2009 2010
Nov Dec Jan Feb Mar Apr
12 April 2010
3-1 Facility investment by type
Source: The Bank of Korea (national accounts)
Economic Bulletin 13
4. Construction investment
Construction investment (preliminary GDP) in the fourth quarter of 2009 rose 5.0 percent
year-on-year, while falling 0.1 percent quarter-on-quarter.
Construction completed (constant value) in February fell 3.9 percent month-on-month, and
2.4 percent year-on-year, due to a high base effect in building construction from the
previous month and weak performance in civil engineering works, affected by the
completion of large-scale private plant construction. By construction category, building
construction completed dropped 3.9 percent year-on-year, while civil engineering works
completed down 0.5 percent.
2009 2010
Nov Dec Jan Feb Mar
Business survey indices (base=100) for 90.1 83.6 74.8 91.4 88.9
construction projections
Source: The Construction and Economy Research Institute of Korea
14 April 2010
4-1 Construction investment
Source: The Bank of Korea (national accounts)
Economic Bulletin 15
5. Exports and imports
Exports in March rose 35.1 percent year-on-year to US$37.69 billion.
Exports grew at a faster pace from the previous month’s 30.5 percent, as major export
markets such as the US and China continued to recover. Average daily exports fell to
US$1.57 billion from the previous month’s US$1.62 billion, whereas those excluding vessels
rose from the previous month’s US$1.37 billion to US$1.43 billion.
By export category, semiconductors (up 123.8%) and automobiles (up 62.5%) soared, and
by regional category, exports to China (up 51.4%) and ASEAN (up 47.6%) jumped.
(US$ billion)
2009 2010
Annual Q1 Q2 Q3 Q4 Mar Q1 Jan Feb Mar
Exports 363.53 74.42 90.36 94.78 103.97 27.89 101.64 30.82 33.14 37.69
(y-o-y, %) -13.9 -25.2 -21.1 -17.6 11.7 -22.5 36.6 45.8 30.5 35.1
Average daily exports 1.30 1.10 1.30 1.32 1.49 1.16 1.52 1.37 1.62 1.57
Imports 323.09 71.42 73.97 84.85 92.85 23.92 98.01 31.45 31.06 35.49
(y-o-y, %) -25.8 -32.7 -35.6 -31.0 1.4 -35.5 37.2 26.3 37.5 48.4
Average daily imports 1.16 1.06 1.06 1.18 1.33 1.00 1.46 1.40 1.52 1.48
Source: Korea Customs Service
Imports in March jumped 48.4 percent year-on-year to US$35.49 billion. Non-ferrous metals
(up 82.3%), crude oil (up 81.5%) and petroleum products (up 41.4%) posted a significant
increase, due to the recovering economy and a price rise in raw materials. Average daily
imports edged down from the previous month’s US$1.52 billion to US$1.48 billion. Imports
of capital goods, raw materials and consumer goods expanded greatly year-on-year.
The trade balance in March posted a surplus of US$2.19 billion, widening a surplus from the
previous month.
(US$ billion)
2009 2010
Annual Q1 Q2 Q3 Q4 Mar Q1 Jan Feb Mar
Trade Balance 40.45 3.0 16.39 9.94 11.12 3.97 3.64 -0.64 2.08 2.19
Source: Korea Customs Service
16 April 2010
5-1 Exports (customs clearance basis)
Source: Korea Customs Service & Ministry of Knowledge Economy (export and import trend)
Economic Bulletin 17
6. Mining and manufacturing production
Mining and manufacturing production increased 3.6 percent month-on-month in February,
the largest since September 2009, while rising 19.1 percent year-on-year.
By business category, semiconductors and parts (up 10.9%), and automobiles (up 10.5%)
grew month-on-month, while audio visual communication equipment (down 7.4%) and
miscellaneous transportation equipment (down 5.9%) fell.
Shipments, led by domestic consumption and exports, continued to improve, posting a 14.3
percent increase year-on-year, while inventory rose 4.7 percent, picking up for the first time
in 14 months since January 2009.
By business category, the shipments of semiconductors and parts (up 41.5%), and
automobiles (up 32.4%) increased year-on-year, while those of leather and shoes (down
15.9%) declined. The inventories of semiconductors and parts (up 42.1%), and automobiles
(up 10.8%) rose year-on-year, while those of apparels and fur (down 34.6%), and primary
metals (down 4.7%) fell.
The average operation ratio of the manufacturing sector rose 1.6 percentage points from the
previous month, landing at 80.5 percent, the highest level since April 2008.
Manufacturing Average operation ratio (%) 77.5 74.6 78.8 78.4 78.2 79.6 78.9 80.5
activity Production capacity 5.1 3.1 3.2 4.0 3.9 4.5 4.5 4.8
1. Preliminary
2. Including mining, manufacturing, electricity and gas industry
3. Information and Communication Technology
4. End-period
Source: Statistics Korea
18 April 2010
6-1 Industrial production
Source: Statistics Korea (industrial activity trend)
6-3 Inventory
Source: Statistics Korea (industrial activity trend)
Economic Bulletin 19
7. Service sector activity
Service activity in February 2010 increased 3.1 percent from a month earlier on the back of
robust educational services and information & communication services.
On the other hand, finance & insurance services fell 3.1 percent from the previous month.
1. Preliminary
Source: Statistics Korea
20 April 2010
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8. Employment
The number of workers on payroll in February 2010 increased by 125,000 from a year earlier,
while the employment rate fell by 0.4 percentage points year-on-year to 56.6 percent. In
seasonally adjusted terms, the number of employed rose by 79,000 from the previous
month and the employment rate was up 0.1 percentage point month-on-month.
By industry, employment in manufacturing (up 45,000) and services (up 310,000) climbed
while that in construction (down 87,000) and agriculture, forestry & fishery (down 143,000)
declined. Hiring in manufacturing increased for two consecutive months helped by overall
increases in exports and manufacturing output of semiconductors and automobiles. The
service sector hired more workers amid domestic demand recovery and elevated
consumption.
By gender, male workers (up 116,000) rose at a faster pace than female workers (up 9,000).
22 April 2010
8-1 Number of employed and employment growth
Source: Statistics Korea (employment trend)
Economic Bulletin 23
The number of unemployed in February 2010 climbed by 244,000 year-on-year to record
1,169,000 and the unemployment rate rose by 1.0 percentage point to 4.9 percent from a
year earlier. When seasonally adjusted, the number of jobless people fell 119,000 from the
previous month to 1,076,000 while the unemployment rate dropped 0.4 percentage points
month-on-month to 4.4 percent.
The number of jobseekers increased as an economic recovery and public work projects
boosted expectations over an improvement in the labor market, which led to the number of
unemployed persons and the unemployment rate to remain high in February as did in January.
By gender, the number of female workers who became jobless (up 143,000) increased at a
faster pace than that of male workers who became jobless (up 101,000) in February.
By age, the jobless surged among youths aged 15 to 29 (up 61,000) and seniors aged 60 or
over (up 98,000).
The economically inactive population in February was up 151,000 from a year earlier to post
16,380,000. Meanwhile, the labor force participation rate was up 0.2 percentage points year-
on-year to 59.5 percent. When seasonally adjusted, the economically inactive population
rose 74,000 month-on-month to 15,770,000 while the labor force participation rate fell 0.1
percentage point to 61.0 percent from a month earlier.
Workers quitting jobs due to childcare & housework (up 86,000) and old age (up 196,000)
surged while those who quit due to reasons such as rest, time-off, and leisure (down
189,000) significantly decreased.
24 April 2010
8-4 Employment rate
Source: Statistics Korea (employment trend)
Economic Bulletin 25
9. Financial market
Optimism grew as public debt problems engulfing Greece could be resolved, thanks to a
successful issuance of Treasury bonds by the Greek government and an agreement by EU
leaders on a bailout plan combining bilateral loans and money from the IMF for a standby aid
package for Greece.
The stock market stayed on an upward trend despite a fall in leading indicators and the
sinking of the naval patrol ship “Cheonan.” Improved economic indicators in the US labor
market and commitments to maintain expansionary monetary policies in the US, China and
Japan fueled the market rally.
The foreign investors maintained the net-buying position, which pushed up the monthly net-
purchasing of shares to the second largest amount ever.
The won’s value against the dollar appreciated as an agreement on the EU-IMF bailout plan
for Greece eased credit concerns in the eurozone while foreign investors continued net-
buying of Korean shares which amounted to around 5.6 trillion won during the month.
The won/yen exchange rate fell 85.4 won month-on-month to 1,213.6 won as of end-March
as the yen depreciated with eased concerns on sovereign debt woes in eurozone countries.
(End-period)
2006 2007 2008 2009 2010
Dec Dec Dec Dec Feb Mar Change1
Won/Dollar 929.8 936.1 1,259.5 1,164.5 1,160.0 1,131.3 2.54
Won/100Yen 783.4 828.6 1,396.8 1,264.5 1,299.0 1,213.6 7.04
1. Appreciation from the end of the previous year (%); the exchange rate is based on the closing price at 3:00 p.m., local time.
26 April 2010
9-1 Stock prices
Economic Bulletin 27
9.3 Bond market
Treasury bond yields were down in March as leading economic indicators shifted to a fall
while the newly appointed governor of the Bank of Korea was expected to maintain
expansionary monetary policies. The yields had plunged until mid March as the policy rate
was expected to remain low, before edging up toward the end of the month due to profit
taking and concerns over exit strategy.
(End-period, %)
2006 2007 2008 2009 2010
Dec Dec Dec Dec Jan Feb Mar Change1
Call rate (1 day) 4.60 5.02 3.02 2.01 2.00 2.01 2.00 -1
CD (91 days) 4.86 5.82 3.93 2.88 2.88 2.88 2.78 -10
Treasury bonds (3 yrs) 4.92 5.74 3.41 4.44 4.27 4.10 3.89 -21
Corporate bonds (3 yrs) 5.29 6.77 7.72 5.56 5.39 5.24 4.89 -35
Treasury bonds (5 yrs) 5.00 5.78 3.77 4.98 4.82 4.62 4.52 -10
1. Basis point changes in March 2010 from the previous month
In February 2010, bank deposits continued to rise as asset management company (AMC)
deposits shifted to an increase.
Bank deposits sustained an upward trend as depositors perceived deposit rates favorable
and efforts to lower the loan-deposit ratio by banks continued. AMC deposits reversed
course to a surge thanks to a massive inflow of funds from banks and the government.
28 April 2010
9-4 Interest rates
Source: The Bank of Korea
Economic Bulletin 29
10. Balance of payments
Korea’s current account shifted to a surplus of US$160 million in February 2010.
The goods account surplus increased moderately to post US$1.53 billion from the previous
month’s US$1.38 billion as the trade account turned to a positive territory.
As the travel account deficit declined with the end of winter vacation, the service account
reduced the deficit to US$1.78 billion from US$2.16 billion of the previous month.
The income account surplus expanded to record US$570 million from US$470 million a
month earlier as an increase in the interest account surplus exceeded a decrease in the
dividend account surplus.
The current transfer account deficit narrowed to US$160 million from the previous month’s
US$310 million with decreased outward remittance.
(US$ billion)
2008 2009 2010
Annual Annual Q1 Q2 Q3 Q4 Jan-Feb Jan Feb
Current account -5.78 42.67 8.62 13.10 10.40 10.56 -0.47 -0.63 0.16
- Goods balance 5.67 56.13 8.31 17.58 14.70 15.54 2.91 1.38 1.53
- Service balance -16.67 -17.20 -1.93 -4.17 -5.33 -5.77 -3.94 -2.16 -1.78
- Income balance 5.90 4.55 0.92 0.29 1.69 1.65 1.03 0.47 0.57
- Current transfers -0.67 -0.81 1.31 -0.60 -0.66 -0.86 -0.47 -0.31 -0.16
Source: The Bank of Korea
The capital and financial account in February 2010 posted a net inflow of US$250 million.
The direct investment account decreased the net outflow to register US$760 million from the
previous month’s US$1.68 billion mainly due to decreasing outbound foreign direct
investment (FDI).
The portfolio investment account increased the net inflow to record US$3.13 billion from
US$150 million a month earlier on the back of overseas bond issuances and a net inflow of
foreign investment fund into the Korean bond market.
The net inflow in the financial derivatives account expanded to post US$250 million from
US$50 million in the previous month as profits from overseas financial derivative
transactions increased.
The other investment account turned to a deficit of US$2.32 billion from the previous
month’s surplus of US$6.02 billion as financial institutions’ lending increased while
borrowing plunged.
The current account is likely to record a surplus of around US$1.0 to 1.5 billion in March as
the goods account surplus expanded despite higher dividend payments.
30 April 2010
10-1 Current account balance
Source: The Bank of Korea (balance of payments trend)
Economic Bulletin 31
11. Prices and international commodity prices
11.1 Prices
Consumer prices in March increased 2.3 percent year-on-year while posting 0.3 percent growth
from the previous month.
Core consumer prices, which exclude the prices of oil and agricultural products, rose by 1.5
percent year-on-year. Consumer prices for basic necessities, a barometer of perceived
consumer prices, were up 2.9 percent compared to the same month of the previous year.
Prices of agricultural, livestock and fishery products as well as oil products showed
strength, while other industrial products prices and service charges were stabilized. Prices
of agricultural, livestock and fishery products maintained the upward track as bad weather
conditions led to a drop in vegetable production.
Prices of agricultural, livestock & fishery products in Mar 2010 (m-o-m, %)
Chinese cabbage (54.4), unripe hot pepper (32.9), green pepper (55.0), cucumber (13.2), mandarin orange
(10.9), pork (-3.7), spinach (-33.5), Korean beef (-2.1)
Although higher international oil prices pushed up oil product prices, prices of other industrial
products stabilized with a mere 0.4 percent increase month-on-month.
Prices of Dubai crude (US$/barrel)
67.7 (Sep 2009) 73.2 (Oct) 77.7 (Nov) 75.5 (Dec) 76.8 (Jan 2010) 73.6 (Feb) -77.3 (Mar)
Public utility charges edged down 0.3 percent from the previous month as most public utility
charges remained unchanged while SK Telecom, Korea’s biggest mobile telephone operator,
started to charge voice calls by each second in March, slashing mobile call charges.
Personal service charges significantly slowed its upward trend compared to the ordinary March
level with relatively stabilizing education service charges affected by universities’ efforts to
freeze tuition fees.
Price increases of personal service charges in Mar 2010 (m-o-m, %)
1.4 (2006) 1.6 (2007) 1.9 (2008) 0.7 (2009) 0.5 (2010)
32 April 2010
11-1 Prices
Source: Statistics Korea (consumer prices, core inflation) & The Bank of Korea (producer prices)
Economic Bulletin 33
11.2. International oil and commodity prices
International oil prices in March increased month-on-month as Europe’s financial woe eased
and expectations of an economic recovery boosted confidence with a gradual improvement in
manufacturing index. In particular, the Institute for Supply Management (ISM)’s index on
manufacturing in the US jumped 3.1 points to 59.6 in March, the highest level since July 2004.
In the domestic market, both gasoline and diesel prices rose month-on-month as internaional
oil prices and international oil product prices went up.
Prices of overall non-ferrous metals in March climbed from a month earlier with the
expectations of an economic recovery. In particular, nickel prices soared due to strikes in
major nickel mines and expanded demand for stainless steel.
International prices of grain including corn and raw sugar fell from the previous month as
robust grain productions in South America boosted the grain harvest outlook for this year.
Reuters index*
(Period average)
2007 2008 2009 2010
Annual Annual Annual Sep Oct Nov Dec Jan Feb Mar
2,400 2,536 2,079 2,147 2,197 2,243 2,294 2,343 2,290 2,269
* A weighted average index of 17 major commodities
Source: KOREAPDS
34 April 2010
11-4 International oil prices
Source: Korea National Oil Corporation
Economic Bulletin 35
12. Real estate market
12.1 Housing market
In March, nationwide apartment sales prices increased at a slower pace of 0.3 percent from
0.4 percent a month earlier.
While apartment sales prices in Seoul including Gangnam decelerated its growing pace to
0.0 percent from 0.3 percent and 0.4 percent, respectively, prices remained steady in
Gyeonggi province (down 0.1%) and Incheon (down 0.0%).
Meanwhile, apartment sales prices in areas excluding the Seoul metropolitan area
continued to increase led by some metropolitan cities such as Busan (up 1.5%) and Daejeon
(up 0.7%) without enough apartments put up for sale.
The increase in rental prices slightly slowed to 0.8 percent from the previous month’s 0.9
percent. In Seoul (up 0.7%), Gangnam decelerated the growing pace from 1.2 percent to 0.5
percent, while rental prices in Gangbuk accelerated the increase from 0.7 percent to 0.9
percent with expanded demand during the spring moving season.
Nationwide 7.6 1.9 0.8 4.5 -1.3 0.9 2.8 2.0 0.4 0.9 0.8 0.2 0.2 0.2 0.2 0.2
Seoul 11.5 2.2 -1.8 8.1 -0.8 1.8 4.7 2.3 0.6 1.0 0.7 0.2 0.2 0.1 0.2 0.1
Gangnam2 11.3 0.5 -3.6 10.4 -0.1 2.4 5.1 2.7 0.9 1.2 0.5 0.1 0.1 0.1 0.2 0.1
Gangbuk 3
11.8 4.6 0.5 5.4 -1.6 1.0 4.2 1.9 0.1 0.7 0.9 0.2 0.2 0.2 0.2 0.2
Seoul metropolitan area 11.7 2.1 -0.4 5.6 -1.8 1.4 4.1 1.8 0.3 0.7 0.7 0.2 0.2 0.2 0.2 0.2
5 metropolitan cities 3.0 1.1 1.6 3.9 -0.9 0.4 1.9 2.6 0.7 1.4 1.0 0.2 0.3 0.2 0.2 0.3
1. Weekly trends 2. Upscale area of Southern Seoul 3. Northern Seoul Source: Kookmin Bank
Apartment sales transactions in February 2010 edged up from 61,974 a month earlier to post
66,500. The transactions were up 11.1 percent from a year earlier and 1.5 percent compared
with the monthly average recorded in the same month for the past 3 years.
36 April 2010
12-1 Real estate prices
Source: Kookmin Bank (national housing price trend)
Economic Bulletin 37
12.2 Land market
Continuing the moderate recovery pace, nationwide land prices in February 2010 rose 0.23
percent, slightly decelerating from the previous month’s 0.25 percent. Land prices in
February were 2.7 percent lower than the pre-crisis peak reached in October 2008.
In the Seoul metropolitan area (up 0.29%), land prices in Incheon (up 0.33%) and Gyeonggi
province (up 0.32%) saw a robust increase.
Meanwhile, land price increases in areas excluding the Seoul metropolitan area slowed to
0.13 percent from 0.14 percent of the previous month.
Nationwide land transactions in February recorded 168,000 land lots, down 1.3 percent from
the previous month, which is equivalent to 91.3 percent of the monthly average (184,000) in
the same month of the past 5 years.
Nationwide land transactions decreased in terms of land lots led by Ulsan (down 22.5%),
South Jeolla province (down 11.3%) and Gyeonggi province (down 11.1%).
38 April 2010
12-4 Land and consumer prices since 1970s
Source: Korea Land Corporation (land prices) & Statistics Korea (consumer prices)
Economic Bulletin 39
13. Composite indices of business cycle indicators
The cyclical indicator of coincident composite index increased 0.7 points month-on-month in
February 2010, continuing the upward trend.
All components of the coincident composite index including the value of construction
completed, the domestic shipment index and the mining and manufacturing production
index increased.
The year-on-year leading composite index went down 1.0 percentage point from the
previous month, continuing the downward trend for two consecutive months.
Three components of the index including the ratio of job openings to job seekers and the
capital goods imports increased, while the other six components such as the value of
construction orders received and the indicator of inventory cycle were down.
2009 2010
Aug Sep Oct Nov1 Dec1 Jan1 Feb1
Coincident composite index (m-o-m, %) 0.8 0.7 0.4 0.5 0.4 0.8 1.2
Cyclical indicator of coincident composite index 98.7 98.9 98.9 99.0 98.9 99.3 100.0
(m-o-m, p) 0.4 0.2 0.0 0.1 -0.1 0.4 0.7
Leading composite index (m-o-m, %) 0.9 0.6 0.6 1.1 0.7 0.3 -0.2
12 month smoothed change
8.6 9.6 10.3 11.3 11.6 11.3 10.3
in leading composite index (%)
(m-o-m, %p) 1.2 0.8 0.7 1.0 0.3 -0.3 -1.0
1. Preliminary
40 April 2010
13-1 Cyclical indicator of coincident composite index
Source: Statistics Korea
Economic Bulletin 41
Policy Issues
New National Accounting System to Take Hold in Three Years
Background
The Ministry of Strategy and Finance adopted the accrual basis accounting and double-entry
bookkeeping system to all sectors of national finance in fiscal year 2009. The rationales
behind the adoption were 1) to effectively manage national assets and reflect them in
national accounting, 2) to clearly show net national assets to help citizens understand the
country’s current fiscal situation, 3) to promote more responsible budget spending through
project specific cost analyses, 4) to use various financial analysis methods of the new
accounting system in making fiscal decisions and responding to fiscal situation changes, and
5) to raise transparency and management competence of the government’s financial
activities through double-entry bookkeeping.
The Ministry of Strategy and Finance has enacted and amended laws and regulations on the
National Accounting Act as belows:
- Enacting National Accounting Standards on March 19, 2009, which aimed at providing
accounting standards needed for accrual basis accounting and double-entry bookkeeping
methods to be applied to national financial activities
42 April 2010
- Setting up specific accounting working rules such as loan accounting working rules and
accumulating cost working rules on May 11, 2009
- Developing 12 guidelines for accounting practices between June and December 2009, three
for financial statements and nine for specific accounts such as government money
accounts, transactions excluding tax revenue and expenditure, and fund accounts
- Amending identified cost methods applied to government asset accounting based on the
National Accounting Act, which used to be independent of the National Accounting Act
An electronic link between budget and accounting has been set in the Digital Budget and
Accounting System (dBrain). Government agencies which do not use the dBrain system have
developed agency-specific tools connecting their budgets and accountings.
Field examination of national assets such as national properties, commodities, and state
claims, which started in November 2008, has been completed, as two final field
investigations confirmed the reliability of the examination. Eight social infrastructures such
as roads, railroads, ports, dams, airports, waterworks, and river and fishing port facilities
have been under field examination since the second half of 2009, the result of which will be
reflected in the government financial statements.
The opening statement of financial position based on the 2008 national assets and liabilities
report began drawing up. The statement will be a foundation for determining basic prices for
accrual basis accounting.
The government offered online trainings as well as off-the-job trainings to 1,800 government
officials in charge of financial settlement and dBrain users.
To fully reflect the value of social infrastructures in national accounting, field examinations
of the social infrastructures are planned to be completed in 2010, followed by asset
evaluation in 2011. The 2011 fiscal year financial statements, which will reflect the value of
the social infrastructures, will be submitted to the National Assembly in 2012.
Economic Bulletin 43
To raise professional human resources dealing with the new accounting system, a legal
basis for recruiting personnel specializing in accounting will be founded in 2010, followed by
actual recruitment beginning in 2012. Incentives will be set in 2011 to motivate government
accounting officials and enhance their professional ability.
To help smooth transition to the new accounting system, the government will temporarily
run Accounting Settlement Advisory Committee in 2010 with experts from the private sector,
which will support drawing-up of government financial statements and examine new
accounting methods.
To found a basis for the new system to firmly take hold, the examination for Certified Public
Accountants (CPAs) will cover national accounting from 2012, along with the introduction of
national certification for government accounting in 2011, given to qualified CPAs. The
national certification for government accounting is a response to increasing demand for CPA
consultation expected with the adoption of accrual basis accounting. According to the new
enforcement decree of the National Accounting Act, funds managing more than 500 billion
won are required to submit CAP audit reports along with financial statements.
44 April 2010
Economic
News Briefing
G-20 Steering Group leaders, South Korean President Lee Myung-bak, US President Barack
Obama, Canadian Prime Minister Stephen Harper, French President Nicolas Sarkozy and
British Prime Minister Gordon Brown, urged fellow G-20 members in a letter signed on March
30, to fulfill the obligations agreed upon during the Pittsburgh Summit.
As the past, current, and future chairs of the G-20 Summit, the group emphasized the need
to implement commitments to ensure strong macroeconomic policy cooperation and to
continue regulatory reforms to strengthen the international financial system.
All G-20 countries must move quickly to implement the new Framework agreed upon in
Pittsburgh to contribute to a strong, sustainable and balanced global growth as well as job
creation, noted the statement. Agreement should be reached in Toronto to fight against the
major risks to global economic stability and sustained growth. In addition, more specific
policy recommendations are needed to be developed for the Seoul Summit in November.
Meanwhile, a financial support group for “Seoul G-20 Business Summit” was launched on
April 5. At the business summit, about hundred international CEOs will get together on the
sidelines of a G-20 summit and share their ideas on economic collaboration between the
public and private sector.
Economic Bulletin 45
Korean economy grows 0.2% in 2009 (Preliminary)
Korea’s real gross domestic product (GDP) expanded by 0.2 percent in 2009 compared with
the previous year as increased government spending offset slowed private sector spending
and exports.
On the production side, the manufacturing sector decreased 1.6 percent while the service
sector increased 1.0 percent, a slowdown from the previous year’s 2.8 percent growth. On the
other hand, the construction turned to an increase of 1.9 percent from a decrease of 2.5
percent a year earlier.
On the expenditure side, facility investment declined at a faster pace of 9.1 percent after
falling 1.0 percent in the previous year. Private consumption and goods exports significantly
slowed the upward trend while government spending and construction investment were up
5.0 percent and 4.4 percent, respectively.
Meanwhile, real gross national income (GNI) in 2009 grew 1.5 percent backed by improving
trade. Per capita GNI at current prices, however, fell US$2,121 or 10.9 percent to post
US$17,175 from US$19,296 a year earlier, due mainly to the won’s depreciation against the
dollar. Per-capita income is expected to rebound to US$20,000 this year on the back of a fast
economic recovery, said the Ministry of Strategy and Finance in a statement released on
March 26.
46 April 2010
Inbound FDI in Q1 posts US$1,540 million
Foreign direct investment (FDI) into Korea recorded US$1,540 million in the first quarter of
2010, down 8.2 percent from US$1,677 million a year earlier. The drop in FDI is affected by
Korea’s largest investors including US and Japanese businesses as their investment costs
increased due to the won’s appreciation.
FDI from the Middle East, China, and the EU sharply increased by 877.8 percent, 401.6
percent, and 57.4 percent, respectively. Meanwhile, US direct investment shrank 89.9
percent and investment by Japan decreased 60.4 percent year-on-year.
By industry, FDI in the service sector increased to US$822 million, up 8.6 percent from the
previous year. The government aims to attract some US$13 billion in FDI this year.
On April 14, Moody’s Investors Service has upgraded Korea’s government bond rating to A1
from A1 while keeping a stable outlook on the country. Moody’s attributed the change to
Korea’s demonstration of “an exceptional level of economic resilience” to the global crises
and the successful curbing of the government’s budget deficit.
The move marked the first by one of the three major credit agencies to return Korea’s
sovereign rating to the level before the Asian financial crisis. In addition, the upgrade is
expected to help Korean financial institutions and companies lower their borrowing costs
and improve global investors’ sentiment toward Korea.
Meanwhile, the Bank of Korea projected that Korea’s GDP growth rate would rise from 0.2
percent in 2009 to 5.2 percent in 2010 and 4.8 percent in 2011 with exports rising and
domestic demand including consumption and facilities investment recovering. The projected
GDP growth for 2010 is raised by 0.6 percentage points from 4.6 percent to 5.2 percent,
while that for 2011 is unchanged from the previous forecast of 4.8 percent. The revised 2010
growth forecast showed the fastest expansion since 2006 when the economy grew 5.2
percent.
Economic Bulletin 47
Chiang Mai Initiative Multilateralization (CMIM) comes into effect
The Chiang Mai Initiative Multilateralization (CMIM), an Asian version of the International
Monetary Fund (IMF), was launched by ASEAN member states, China, Japan and Korea
(ASEAN+3) on March 24, 90 days after the signing of the agreement. The US$120 billion fund
provides financial support through currency swap transactions to CMIM participants facing
balance-of-payment and short-term liquidity problems in accordance with the level of each
country’s contribution. Korea, which contributed US$19.2 billion, or 16 percent of the fund, is
able to receive up to the same amount as its contribution.
Korea’s consolidated fiscal balance for Fiscal Year 2009 posted a deficit of 17.6 trillion won,
or 1.7 percent of GDP, as total expenditure (272.9 trillion won) exceeded total revenue
(255.3 trillion). The budget deficit to GDP ratio was relatively healthy compared to that of the
US (11.4%) and the UK (11.2%).
According to the OECD’s report “Preparing Fiscal Consolidation,” Korea ranked fourth in
terms of fiscal soundness measured by the fiscal deficit to GDP ratio, after Norway,
Switzerland and New Zealand. The report also forecasted that Korea would be the only
country among OECD members to register a surplus in fiscal balance in 2010 with a budget
surplus of 0.4 percent of GDP.
On the other hand, the so-called “adjusted fiscal balance,” which equals to consolidated
fiscal balance minus the surplus in social security funds recorded 43.2 trillion won in deficit.
The government’s closed balance sheets will be presented to the National Assembly by the
end of May 2010 after the examination by the Board of Audit and Inspection.
(trillion won)
2008 (A) 2009 Change
Budget (B) Settlement (C) C-A C-B
1. Revenue (consolidated budget) 250.7 253.9 255.3 4.6 1.4
2. Expenditure (consolidated budget) 238.8 275.9 272.9 34.1 -3.0
3. Consolidated fiscal balance (1-2) 11.9 -22.0 -17.6 -29.5 4.4
(3 to GDP ratio, %) 1.2 -2.1 -1.7 -2.9%p -
4. Social security balance 27.5 29.0 25.6 -1.9 -3.4
5. Adjusted fiscal balance (3-4) -15.6 -51.0 -43.2 -27.6 7.8
(5 to GDP ratio, %) -1.5 -5.0 -4.1 -2.6%p -
48 April 2010
Korea to develop 300 “hidden champions” by 2020
The Korean government will provide extended tax cuts and other financial incentives to mid-
sized companies, which are sandwiched between small-and mid-sized enterprises (SMEs)
and big companies. Also, the government aims to nurture 300 globally competitive mid-
sized companies, commonly known as “hidden champions” by 2020, providing various
support to those with high growth potential and leading technologies.
The promising companies will enjoy various tax breaks on research and development (R&D)
spending, easy loans and technological support from state institutions, said the Ministry of
Knowledge Economy on March 18. The ministry will also support their overseas marketing
activities and provide “corporate doctors” to help them develop new technologies and
create long-term growth strategies.
There has been some criticism in Korea that R&D projects and highly-skilled manpower have
been concentrated in conglomerates, which has been seen a threat to sustainable economic
development. In this regard, nurturing the globalized hidden champions is crucial for the
nation’s future.
Meanwhile, the government held the 4th National Employment Strategy Meeting on April 8
and discussed ways to create jobs in promising service sectors and strategies to nurture
contents, media and 3D industries. The government will enhance its efforts in developing
detailed measures to strengthen the service sector, which has a high impact on employment.
On December 16, 2009, the Financial Services Commission (FSC) announced that it would
adopt banks’ loan-to-deposit (LTD) guidance ratio to encourage sound management of local
banks and alleviate factors driving the asset competition among them. As a follow-up
measure, the Regulation on Supervision of Banking Business is set to be amended to employ
banks’ LTD ratio after a notice and adjustment period.
Although domestic banks’ LTD ratio was around 100 percent at the end of 2004, the ratio
surged between 2005 and 2007 reaching 127.1 percent at the end of 2007. However,
following the continuing guidance from the regulator to reduce the ratio since the second
half of 2008, banks’ LTD ratio fell to 110.4 percent as of end-January 2010.
Economic Bulletin 49
LTD ratio of commercial banks
(period average, %)
2003 2004 2005 2006 2007 2008 2009 2009 2009 Jan 2010
Excluding CDs 95.4 101.7 103.7 111.9 127.1 121.9 115.3 113.6 112.1 110.4
Including CDs 89.0 94.0 93.3 98.4 106.3 103.0 99.8 98.1 97.6 97.3
The National Agricultural Cooperative Federation (NACF) and Commercial banks with won-
denominated loans exceeding 2 trillion won including foreign bank branches will be required
to reduce their LTD ratio to 100 percent or lower with a grace period until the end of 2013
whereupon banks should maintain the ratio within 100 percent from January 1, 2014. To
oversee the progressive lowering of the ratio during the grace period, the Financial
Supervisory Service (FSS) will review the ratio retrenchment plans of each bank annually.
50 April 2010
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 indices of business cycle indicators and BSI
9. Balance of payments (I)
10. Balance of payments (II)
11. Prices
12. Employment
13. Financial indicators
14. Monetary indicators
15. Exchange rates
Economic Bulletin 51
1. National accounts
(year-on-year change, %, chained 2005 year prices)
P: Preliminary
Source: The Bank of Korea
52 April 2010
Growth rate by economic activity
Economic Bulletin 53
2. Production, shipment and inventory See graphs 6-1, 6-3, 7-1, 7-2 & 7-3
(constant prices, 2005 = 100)
Service
Production Shipment Inventory
Period Y-o-Y Y-o-Y Y-o-Y production Y-o-Y
index index index
change (%) change (%) change (%) index change (%)
P: Preliminary
Source: Statistics Korea
54 April 2010
3. Production capacity and operation ratio See graph 6-2
P: Preliminary
Source: Statistics Korea
Economic Bulletin 55
4. Consumer goods sales index See graphs 2-2, 2-3, 2-4 & 2-5
(constant prices, 2005 = 100)
Consumer
goods
Period Durable Semi-durable Non-durable
sales
Y-o-Y goods Y-o-Y goods Y-o-Y goods Y-o-Y
index
change (%) change (%) change (%) change (%)
P: Preliminary
Source: Statistics Korea
56 April 2010
5. Consumer goods shipment index and consumer sentiment index
See graph 2-6
Domestic consumer
goods shipment index Consumer
Period (2005=100) Durable Non-durable sentiment index
Y-o-Y goods Y-o-Y goods Y-o-Y
change (%) change (%) change (%)
Economic Bulletin 57
6. Machinery orders received, domestic machinery shipment
and estimated facility investment index See graph 3-2
Domestic machinery orders received Domestic
Estimated
excluding ship (billion won, constant prices) machinery
facility investment
Period shipment
index
excluding ship
Total Public Private (2005=100)
Manufacturing (2005=100)
P: Preliminary
Source: Statistics Korea
58 April 2010
7. Value of construction completed and domestic construction
orders received See graphs 4-2 & 4-3
(current prices, billion won)
Economic Bulletin 59
8. Composite indices of business cycle indicators and BSI
See graphs 13-1, 13-2 & 13-3
Cycle of
Leading Coincident
coincident
Period index Y-o-Y index BSI (results) BSI (prospects)
index
(2005=100) change (%) (2005=100)
(2005=100)
60 April 2010
9. Balance of payments (I) See graphs 5-1, 5-2, 5-3, 10-1 & 10-2
(million US$)
Economic Bulletin 61
10. Balance of payments (II) See graph 10-3
(million US$)
P: Preliminary
Source: The Bank of Korea
62 April 2010
11. Prices See graphs 11-1, 11-2 & 11-3
(2005 = 100)
Producer prices
Consumer prices Export & import prices
(2005=100)
Period
All Items Commodity Service Core All items Commodity Export Import
Economic Bulletin 63
12. Employment See graphs 8-1, 8-2 & 8-3
2008 1 23,738 22,964 4,022 17,651 3.3 16,032 8,815 5,115 2,102
2 23,703 22,884 4,017 17,510 3.5 15,836 8,804 5,055 1,977
3 24,114 23,305 3,999 17,732 3.4 15,993 8,898 5,023 2,073
4 24,495 23,711 4,001 17,929 3.2 16,258 8,894 5,127 2,238
5 24,692 23,939 3,987 18,046 3.0 16,405 9,010 5,165 2,231
6 24,727 23,963 3,993 18,067 3.1 16,385 9,039 5,132 2,214
7 24,673 23,903 3,975 18,088 3.1 16,363 9,054 5,163 2,146
8 24,380 23,617 3,899 17,872 3.1 16,104 9,107 4,970 2,027
9 24,456 23,734 3,928 17,951 3.0 16,221 9,142 5,015 2,064
10 24,582 23,847 3,945 18,005 3.0 16,314 9,138 5,034 2,142
11 24,566 23,816 3,897 18,086 3.1 16,377 9,111 5,071 2,195
12 24,032 23,245 3,888 17,935 3.3 16,189 9,068 5,082 2,040
2009 1 23,709 22,861 3,895 17,663 3.6 16,053 9,102 4,982 1,969
2 23,667 22,742 3,842 17,539 3.9 15,953 9,194 4,862 1,897
3 24,062 23,110 3,813 17,701 4.0 16,076 9,174 4,941 1,961
4 24,456 23,524 3,846 17,899 3.8 16,353 9,227 5,051 2,076
5 24,658 23,720 3,846 18,016 3.8 16,484 9,316 5,076 2,092
6 24,927 23,967 3,836 18,251 3.9 16,736 9,340 5,281 2,115
7 24,756 23,828 3,802 18,210 3.7 16,589 9,383 5,255 1,952
8 24,525 23,620 3,761 18,048 3.7 16,479 9,472 5,117 1,890
9 24,630 23,805 3,810 18,155 3.4 16,687 9,606 5,151 1,931
10 24,655 23,856 3,858 18,130 3.2 16,690 9,628 5,170 1,892
11 24,625 23,806 3,855 18,267 3.3 16,790 9,603 5,256 1,931
12 24,063 23,229 3,872 18,104 3.5 16,555 9,632 5,074 4,860
2010 1 24,082 22,865 3,924 17,796 5.0 16,297 9,712 4,860 1,725
2 24,035 22,867 3,886 17,762 4.9 16,282 9,786 4,838 1,657
3 24,382 23,377 3,924 18,047 4.1 16,617 9,926 4,976 1,714
Y-o-Y change (%)
2008 0.5 0.6 -1.3 1.3 - 1.5 4.5 -1.8 -2.6
2009 0.2 -0.3 -3.2 0.5 - 1.5 4.3 0.4 -7.4
64 April 2010
13. Financial indicators See graphs 9-1 & 9-4
(period average)
Economic Bulletin 65
14. Monetary indicators See graph 9-5
(period average) (billion won)
66 April 2010
15. Exchange rates See graphs 9-2 & 9-3
Economic Bulletin 67
Editor-in-Chief
Park, Cheol-Kyu (MOSF)
Editorial Board
Kim, Young-Min (MOSF)
Shim, Jae-Hak (KDI)
Lee, In-Sook (KDI)
Coordinators
Kim, Dae-Hyun (MOSF)
Cho, Hyun-Joo (KDI)
Editors
Lim, Keun-Hyuk (MOSF)
Kim, Sun-Young (MOSF)
Kang, Ji-Eun (KDI)
Ministry of Labor
http://english.molab.go.kr/english
Statistics Korea
http://kostat.go.kr