economic bulletin (vol. 32, no.1)

8/14/2019 Economic Bulletin (Vol. 32, No.1)

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The Green Book: Current Economic TrendsOverview 3

1. Global economy 4

2. Private consumption 8

3. Facility investment 12

4. Construction investment 14

5. Exports and imports 16

6. Mining and manufacturing production 18

7. Service sector activity 20

8. Employment 22

9. Financial markets 24

9.1 Stock market9.2 Exchange rate9.3 Bond market9.4 Money supply & money market

10. Balance of payments 28

11. Prices and international commodity prices 30

11.1 Prices11.2 International oil and commodity prices

12. Real estate market 34

12.1 Housing market12.2 Land market

13. Composite indices of business cycle indicators 38

Policy IssuesLabor union law revised 40

Economic News Briefing 43

Statistical Appendices 49

Republic of Korea

Economic Bulletin

Vol. 32 | No. 1


3/67

Economic Bulletin 3

The Korean economy continued an upward trend as real economic indicators such asproduction, investment and exports stayed in a recovery phase, while financial marketsremained stable.

Mining and manufacturing production in November rose 1.4 percent month-on-month and17.8 percent year-on-year. Service output fell 1.2 percent month-on-month, affected by theH1N1 flu pandemic. On a year-on-year basis, however, the index rose 3.3 percent.

Consumer goods sales slightly declined month-on-month by 0.9 percent in November due todrops in semi-durable and non-durable goods sales, while the indicator accelerated a year-on-year rise from 9.8 to 10.0 percent, backed by a low base effect and growing durable goodssales.

Facilities investment increased in November by 7.0 percent month-on-month and 10.3percent year-on-year, helped by recovering machinery investment. Construction completed,thanks to the private sector posting a year-on-year rise in nine months, grew both month-on-month and year-on-year by 1.2 percent and 4.2 percent, respectively.

Exports in December jumped 33.7 percent year-on-year, positively affected by a rise in majorexports including liquid crystal devices and a low base effect. Imports soared 24.0 percentyear-on-year, as imports of raw materials and capital goods rose and the low base lifted theindex.

The total number of workers hired shed 10,000 year-on-year in November, as hiring in theagriculture, forestry & fishery significantly dropped. The unemployment rate slightlyincreased month-on-month from 3.2 to 3.3 percent.

Consumer prices in December remained in the 2 percent range, despite rising prices ofagriculture, livestock & fishery products, of which the shipments declined due to a cold wave.

In December, financial markets continued to be stable, as worries over Dubai Worldspossible default eased, a Koreas consortium won a contract to export nuclear facilities to theUnited Arab Emirate (UAE), and the stock market rallied reflecting expectations over aneconomic recovery, while the interest rate reversed to a slight increase.

To sum up, although the Korean economy passed the critical stage and has continued toimprove, the recovery does not seem to be firmly entrenched, as the private sector is notstrong enough to drive consumption, investment and employment, and externaluncertainties including oil prices are still lingering.

The Korean government, to secure economic recovery, will keep pursuing expansionary fiscal

policies and spend budgets as planned, and at the same time it will continue to create jobsand support the working class. On the other hand, the government will step up its efforts toreform the economy through corporate restructuring and nurture growth potential, in orderto found a basis for a future economic take-off.

The Green BookCurrent Economic Trends

Overview


4/67

4 January 2010

1. Global economy

The global economy is showing a gradual recovery as production and exports improved in

advanced countries. However, potential threats to global economic stability including

sluggish employment still remain.

Also, concerns grew over sovereign debt risks as Standard & Poors revised its credit outlook

for Spain to negative from stable on December 9, 2009 and Fitch cut Greece's credit rating to

BBB+ from A- on December 8.

The US revised down annualized quarter-on-quarter real GDP growth in the third quarter

from 2.8 to 2.2 percent, as the level of inventory declined and investment in non-housing

construction decelerated.

In November, production and consumption continued upward trends, as industrialproduction increased 0.8 percent month-on-month, and retail sales 1.3 percent.

Sales of existing homes in November jumped 7.4 percent from the previous month, backed

by the tax credit, while new home sales fell 11.3 percent.

In November, non-farm payrolls declined at a slightly slower pace, while the unemployment

rate hovered over the 10-percent range, showing the sluggish labor market.

The Federal Reserve announced in the Federal Open Market Committee (FOMC) on

December 17, 2009 that it would maintain the target range for the federal funds rate at 0.0 to

0.25 percent, along with the plan to complete the purchase of US$1.25 trillion of agencymortgage-backed securities and about US $175 billion of agency debt by the first quarter of

2010.

US

(Percentage change from previous period)

Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Nov

Real GDP1

- Personal consumption expenditure

- Corporate fixed investment

- Construction investment for housing

Industrial productionRetail sales

New home sales

New non-farm payroll employment(q-o-q, thousand)2

Consumer prices (y-o-y, %)

2008 2009

1. Annualized rate (%)

2. Monthly average

Source: US Department of Commerce

0.4

-0.2

1.6

-22.9

-1.8-0.7

-37.4

-257

3.9

-0.7

-0.6

1.9

-28.2

0.1-0.5

-14.8

-113

4.2

1.5

0.1

1.4

-15.8

-1.20.4

-9.6

-153

4.3

-2.7

-3.5

-6.1

-15.9

-2.3-1.5

-9.8

-208

5.2

-5.4

-3.1

-19.5

-23.2

-3.4-6.7

-15.0

-553

1.5

-6.4

0.6

-39.2

-38.2

-5.2-1.2

-13.5

-691

-0.2

-0.7

-0.9

-9.6

-23.3

-2.7-0.3

9.9

-428

-0.9

2.2

2.8

-5.9

18.9

1.51.6

9.4

-199

-1.6

-

-

-

-

0.81.3

-11.3

-11

1.8


5/67

Economic Bulletin 5

US federal funds rate and consumer prices

Source: US Federal Reserve Board & Department of Labor

US non-farm payroll employment (m-o-m change)

Source: US Department of Labor

US GDP (q-o-q, annualized rate)

Source: US Department of Commerce1-1

1-2

1-3


6/67

6 January 2010

Investment and consumption in China continued to improve in November, with industrialproduction surging and exports declining at a much slower pace. The consumer price indexturned positive and home prices had accelerated a rise since June 2009, fanning concernsover a potential asset bubble.

Japan revised down annualized quarter-on-quarter real GDP growth in the third quarter to0.3 percent, but automobile sales rose in overseas markets, helping exports and industrialproduction continue an upward march.

The Cabinet Office unveiled on December 9, 2009 its new economic stimulus package of 7.2trillion yen (US$81 billion), which included employment promotion, while deflation took itscourse as consumer prices declined for the eighth straight month.

Eurozones exports declined at a slower pace, whereas the unemployment rate in Octoberhit 9.8 percent, the highest since 1980, showing the depressed employment market. The EU,at the summit meeting on December 14, announced that the eurozone would maintaineconomic stimulus policies until a durable economic recovery takes hold, as uncertaintiesand vulnerabilities still lingered in the economy.

China

Japan

(Percentage change from same period in previous year)

Real GDP

Fixed asset investment (accumulated)

Retail sales

Industrial production

Exports

Consumer prices

Producer prices

2008 2009

Annual

9.0

26.1

21.6

12.9

17.2

5.9

6.9

Q1

10.6

25.9

20.6

16.4

21.4

8.0

6.9

Q2

10.1

26.8

22.2

15.9

22.4

7.8

8.4

Q3

9.0

27.6

23.2

13.0

22.9

5.3

9.7

Q4

6.8

26.1

20.6

6.4

4.1

2.5

2.5

Q1

6.1

28.6

15.0

5.1

-19.7

-0.6

-4.6

Q2

7.9

33.6

15.0

9.1

-23.5

-1.5

-7.2

Q3

8.9

33.3

15.4

12.4

-20.7

-1.3

-7.7

Oct

-

33.1

16.2

16.1

-13.8

-0.5

-5.8

Nov

-

32.1

15.8

19.2

-1.2

0.6

-2.1

Source: China National Bureau of Statistics

Real GDP

Industrial and mining production

Retail sales (y-o-y, %)

Exports (y-o-y, %)


2008 2009(Percentage change from previous period)

Annual

-0.7

-3.4

0.3

-3.5

1.4

Q1

1.4

0.3

1.8

5.9

1.0

Q2

-2.1

-1.5

0.2

1.8

1.4

Q3

-1.0

-3.3

0.8

3.2

2.2

Q4

-2.7

-17.7

-1.5

-23.1

1.0

Q1

-3.1

-17.2

-3.9

-46.9

-0.1

Q2

0.7

14.6

-0.9

-38.5

-1.0

Q3

0.3

5.9

-3.4

-34.4

-2.2

Oct

-

0.5

-1.0

-23.2

-2.5

Nov

-

2.6

-1.0

-6.3

-1.9

Source: Japan's Statistics Bureau and Statistics Centre

Home prices (y-o-y, %)-1.1 (Apr 2009) -0.6 (May) 0.2 (Jun) 1.0 (Jul) 2.0 (Aug) 2.8 (Sep) 3.9 (Oct) 5.7 (Nov)

Eurozone

Source: Eurostat

Real GDP


Retail sales

Exports (y-o-y, %)


2008 2009

(Percentage change from previous period)

Annual

0.8

-1.7

-0.7

3.6

3.3

Q1

0.8

0.9

0.3

6.5

3.3

Q2

-0.3

-1.1

-0.6

8.0

3.6

Q3

-0.4

-1.8

-0.5

5.3

3.8

Q4

-1.9

-7.6

-0.9

-5.0

2.3

Q1

-2.4

-8.7

-0.8

-20.9

1.0

Q2

-0.2

-1.2

-0.3

-23.2

0.2

Q3

0.4

2.1

-0.3

-19.3

-0.4

Oct

-

-0.6

0.1

-16.8

-0.1

Nov

-

-

-

-

0.5


7/67

Economic Bulletin 7

Eurozone GDP growth and industrial production

Source: Eurostat

Japans GDP growth

Source: Cabinet Office & Ministry of Economy, Trade and Industry, Japan

Chinas GDP and fixed asset investment

Source: National Bureau of Statistics of China1-4

1-5

1-6


8/67

8 January 2010

2. Private consumption

Private consumption (preliminary GDP) in the third quarter increased 1.5 percent quarter-on-

quarter, or 0.8 percent year-on-year.

Consumer goods sales in November edged down 0.9 percent month-on-month, but rose 10.0

percent year-on-year, posting an increase for the seventh consecutive month.

On a month-on-month basis, durable goods sales was up 4.4 percent for the third straight

month, whereas semi-durable and non-durable goods sales fell 1.9 percent and 3.3 percent,

respectively. On a year-on-year basis, durable goods sales jumped 39.5 percent, thanks to

solid automobiles sales backed by tax incentives, while sales of semi-durable and non-

durable goods rose 1.3 percent and 2.1 percent, respectively.

Sales at department stores rose 5.5 percent, continuing an upward track for nine months in

a row, while sales at specialized retailers posted double-digit growth for the second straight

month.


Consumer goods sales

(Seasonally adjusted)2

- Durable goods3

Automobiles

- Semi-durable goods4

- Non-durable goods5

1. Preliminary

2. Percentage change from previous period

3. Durable goods: Automobiles, electronic appliances, furniture, telecommunications devices, etc.

4. Semi-durable goods: Clothing, footwear, etc.

5. Non-durable goods: Food, medicine, cosmetics, fuel, tobaccos, etc.

Source: Statistics Korea

2008 2009

Annual

1.0

-

1.9

-2.0

-2.4

0.7

Q2

2.9

-1.3

8.7

7.1

-2.1

0.3

Q3

1.4

-0.1

0.0

-4.9

0.6

1.2

Q4

-4.2

-3.5

-9.9

-19.5

-9.9

-0.4

Q1

-4.9

0.4

-13.6

-21.3

-0.9

-1.4

Q2

1.6

5.0

4.0

18.4

0.3

1.0

Q3

3.4

1.5

9.9

29.7

0.2

2.0

Sep

6.6

1.7

26.1

65.7

2.6

0.3

Oct1

9.8

2.9

15.6

36.1

3.6

10.0

Nov1

10.0

-0.9

39.5

108.4

1.3

2.1


Annual Q2 Q3 Q4 Q1 Q2 Q3 Sep Oct1 Nov1

- Department stores

- Large discounters

- Specialized retailers2

2008 2009

1. Preliminary

2. Specialized retailers are defined as stores carrying a few (1 to 3) specialized items.


0.5

2.2

-1.7

3.7

3.1

0.7

0.2

-0.2

-1.0

-5.0

-1.2

-8.1

1.4

-5.0

-6.9

2.8

-2.9

2.6

6.5

-3.2

4.5

8.8

-2.0

8.6

12.0

5.5

10.7

5.5

-1.1

12.5


Private consumption2


2007 20081 20091

1. Preliminary 2. National accounts 3. Percentage change from previous period

Source: The Bank of Korea

Annual

5.1

-

Annual

0.9

-

Q1

4.0

1.1

Q2

2.3

-0.2

Q3

1.4

0.0

Q4

-3.7

-4.6

Q1

-4.4

0.4

Q2

-0.8

3.6

Q3

0.8

1.5


9/67

Economic Bulletin 9

Consumer goods sales by type

Source: Statistics Korea (industrial activity trend)

Consumer goods sales


Private consumption

Source: The Bank of Korea (national accounts)2-1

2-2

2-3


10/67

10 January 2010

In December, consumer goods sales is likely to turn positive month-on-month, and continue

to rise year-on-year, given improving advanced estimates and consumer sentiment, and a

low base effect from the same period in the previous year.

Domestic credit card spending increased year-on-year from the previous months 18.3

percent to 20.0 percent, posting double-digit growth for the second consecutive month.

Sales at department stores grew 12.4 percent year-on-year, up 6.0 percentage points from

the previous month, continuing an upward trend. Sales at large discounters grew 3.9

percent year-on-year from the previous months decline of 2.8 percent.

Domestic sales of Korean cars soared 79.9 percent year-on-year, affected by the release of

new cars, demand surge before expiration of the tax break for new car purchases, and a low

base effect from the previous year. However, gasoline sales slightly declined.

Stabilizing financial markets and improving consumer sentiment are also expected to

positively affect consumption.

Value of credit card use (y-o-y, %)

7.3 (Jul 2009) 10.9 (Aug) 14.7 (Sep) 9.4 (Oct) 18.3 (Nov) 20.0 (Dec)

Department store sales (y-o-y, %)


Discount store sales (y-o-y, %)

-6.0 (Jul 2009) -1.5 (Aug) -6.0 (Sep) 4.5 (Oct) -2.8 (Nov) 3.9 (Dec)

Domestic sales of Korean automobiles (y-o-y, %)


Domestic sales of gasoline (y-o-y, %)

15.8 (Jul 2009) 4.0 (Aug) -0.3 (Sep) 20.7 (Oct) -3.0 (Nov) -4.4 (Dec)

Source: Ministry of Knowledge EconomyThe Credit Finance Association

Korea Automobile Manufacturers Association

Korea National Oil Corporation

Ministry of Strategy and Finance (for December data)



The won/dollar exchange rate (monthly average)1,264 (Jul 2009) 1,238 (Aug) 1,219 (Sep) 1,175 (Oct) 1,164 (Nov) 1,166 (Dec)

KOSPI (monthly average)

1,460 (Jul 2009) 1,579 (Aug) 1,659 (Sep) 1,631 (Oct) 1,583 (Nov) 1,647 (Dec)

Consumer Sentiment Index (CSI)

109 (Jul 2009) 114 (Aug) 114 (Sep) 117 (Oct) 113 (Nov) 113 (Dec)


11/67

Economic Bulletin 11

Domestic automobile sales

Source: Korea Automobile Manufacturers Association (monthly automobile industry trend)

Department store and discount store sales (current value)

Source: Ministry of Knowledge Economy (monthly retail sales)2-4

2-5

2-6 Consumer sentiment index



12/67

12 January 2010

3. Facility investment

Facility investment (preliminary GDP ) in the third quarter posted a quarter-on-quarter

increase of 10.4 percent, and a year-on-year loss of 7.4 percent.

Facility investment in November rose 10.3 percent year-on-year, as machinery investment, in

particular that in semi-conductor equipment, rapidly improved, and transportationequipment investment, in particular automobile investment, continued to increase.

Machinery investment increased 7.4 percent year-on-year, the second fastest increase since

November 2007 when it rose 7.9 percent, approaching the pre-crisis level.

Facility investment in December is projected to stay on an upward track, given growing

corporate investment confidence and improving leading indicators such as rising domestic

machinery orders and increasing facility investment adjustment pressure.

Machinery investment index

109.7 (Sep 2008) 99.2 (Oct) 83.1 (Jan 2009) 90.1 (Aug) 107.8 (Nov)


Facility investment2


- Machinery

- Transportation equipment

1. Preliminary 2. National accounts 3. Percentage change from previous period


2007 20081 20091

Annual

9.3

-

9.2

9.6

Annual

-2.0

-

-2.7

0.4

Q1

1.5

-0.4

-1.2

12.2

Q2

1.1

0.4

-0.1

5.1

Q3

4.3

0.2

6.5

-3.6

Q4

-14.0

-14.2

-15.3

-9.9

Q1

-23.5

-11.2

-24.0

-21.8

Q2

-15.9

10.1

-19.6

-3.2

Q3

-7.4

10.4

-15.1

21.8


Facility investment


- Machinery

- Transportation equipment

Domestic machinery orders

- Public

- Private

Facility investmentadjustment pressure3

1. Preliminary

2. Percentage change from previous period3. Production growth rate minus production capacity growth rate in the manufacturing sector (%p)

Sources: Statistics Korea

2007 2008 2009

Annual

8.2

-

7.5

11.3

20.6

-11.4

24.5

1.7

Annual

-4.3

-

-5.7

1.5

-5.5

4.9

-6.2

-2.2

Q4

-13.4

-9.3

-14.5

-9.0

-47.3

-3.5

-53.9

-15.6

Q1

-17.7

-11.6

-21.9

0.4

-33.8

150.5

-42.9

-18.9

Q2

-13.4

6.6

-19.5

11.3

-14.1

30.9

-18.5

-8.5

Q3

-10.1

4.2

-17.2

19.6

6.5

281.3

-12.4

1.6

Sep

5.0

17.9

-6.0

54.4

31.9

129.5

25.5

8.3

Oct1

0.5

-5.6

0.6

0.0

3.0

-75.7

26.9

-3.0

Nov1

10.3

7.0

7.4

21.1

56.6

108.8

46.4

15.1


Sep Oct Nov Dec Jan

Business survey indices (base=100) for

95 100 96 98 103manufacturing facility investment projections

2009 2010


13/67


Machinery orders and estimated facility investment (3-month average)


Machinery imports

Source: Korea International Trade Association (KITA)

Facility investment by type


3-2

3-3


14/67

14 January 2010

4. Construction investment

Construction investment (preliminary GDP ) in the third quarter rose 2.7 percent year-on-

year, and declined 2.0 percent quarter-on-quarter.

Construction completed (current value ) in November rose 4.2 percent year-on-year, as

construction completed in the private sector improved along with the public sector, for the

first time in nine months since February 2009, landing at a 3.4 percent increase year-on-year.

Both building construction and civil engineering works climbed by 0.5 percent and 9.8

percent, respectively.

Construction investment is projected to slightly improve in December, given a rise in leading

indicators such as construction orders and building permit area. Construction orders in the

private sector, for the first time since December 2007, advanced for three consecutive

months from a year earlier.


Construction investment2


- Building construction

- Civil engineering works

1. Preliminary

2. National accounts



2007 20081 20091

Annual

1.4

-

-0.0

3.8

Annual

-2.1

-

-4.3

1.3

Q1

-1.9

-2.5

-1.2

-3.2

Q2

-0.3

-0.3

-0.1

-0.7

Q3

0.2

0.1

-0.1

0.7

Q4

-5.6

-3.0

-14.3

5.7

Q1

1.6

5.2

-11.1

24.9

Q2

3.7

1.7

-3.5

14.3

Q3

2.7

-2.0

-0.4

7.7


Construction completed


- Public

- Private

Construction orders

- Public

- Private

Building permit area

1. Preliminary


Source: Statistics Korea & The Ministry of Land, Transport and Maritime Affairs

2007 2008 2009

Annual

6.6

-

8.4

4.6

23.6

40.3

16.5

13.3

Annual

4.7

-

6.5

1.7

-9.0

9.1

-15.8

-20.1

Q4

-2.2

-6.2

8.7

-9.1

-6.5

5.0

-15.3

-41.9

Q1

4.5

7.7

24.4

-5.0

-16.5

22.0

-38.4

-31.6

Q2

7.0

2.2

32.1

-5.2

-2.0

186.5

-62.4

-32.7

Q3

-0.6

-6.6

21.7

-11.3

9.1

75.6

-10.7

-4.6

Sep

7.7

10.1

32.2

-4.3

58.4

101.1

61.8

31.4

Oct1

-5.2

-2.9

4.9

-9.6

27.2

89.7

16.3

-29.5

Nov1

4.2

1.2

8.1

3.4

77.0

64.6

85.6

14.1


15/67


Leading indicators of construction investment

Source: Statistics Korea (construction orders)

Ministry of Land, Transport and Maritime Affairs (building construction permit area)

Construction completed and housing construction

Source: Statistics Korea (construction completed)

Kookmin Bank (housing construction)

Construction investment


4-2

4-3


16/67

16 January 2010

5. Exports and imports

Exports in December soared 33.7 percent year-on-year to US$36.24 billion.

The large increase in exports is mainly attributed to a low base effect from the previous year

and the global economy recently recovering. Daily average exports in working-day-adjusted-

terms also rose from the previous month.

By export category, liquid crystal devices (up 177.7% ) and semiconductors (up 125.5%)

surged, and by regional category, exports to China (up 94.0%) and the EU (up 41.7%) greatly

improved.

Imports in December jumped 24.0 percent year-on-year to US$32.94 billion due to a low

base effect and improving domestic demand. Average daily imports in working-day-

adjusted-terms also increased from the previous month. Imports of capital goods further

expanded, while raw material imports switched to an increase, affected by rising oil prices.

The trade balance in December posted a surplus of US$3.30 billion, staying in the black foreleven straight months since February 2009. The annual trade balance of 2009 recorded a

surplus of US$40.98 billion, the largest surplus ever.

Raw materials (y-o-y, %)

-34.7 (Q1 2009) -43.0 (Q2) -39.3 (Q3); -7.0 (Nov) 24.8 (Dec)

Capital goods (y-o-y, %)

-29.1 (Q1 2009) -23.6 (Q2) -13.7 (Q3); 17.8 (Nov) 29.1 (Dec)

Consumer goods (y-o-y, %)

-29.5 (Q1 2009) -24.4 (Q2) -20.9 (Q3); 15.3 (Nov) 7.4 (Dec)

(US$ billion)

Exports

(y-o-y, %)

Average daily exports

Imports

(y-o-y, %)

Average daily imports

2008 2009

Annual

422.0113.6

1.53

435.27

22.0

1.58

Dec

27.12-17.9

1.13

26.58

-21.6

1.11

Q1

74.41-25.2

1.10

71.45

-32.6

1.06

Q2

90.32-21.1

1.30

73.82

-35.7

1.06

Q3

94.77-17.6

1.32

84.79

-31.0

1.18

Oct

33.96-8.5

1.48

30.34

-16.0

1.32

Nov

34.0818.1

1.48

29.46

2.1

1.28

Dec

36.2433.7

1.51

32.94

24.0

1.37

Jan-Dec

363.77-13.8

1.30

322.79

-25.8

1.16

Source: Korea Customs Service

(US$ billion)

Trade Balance

2008 2009

Annual

-13.27

Dec

0.32

Q1

2.99

Q2

16.50

Q3

9.98

Oct

3.62

Nov

4.62

Dec

3.30

Jan-Dec

40.98

Source: Korea Customs Service


17/67


Imports (customs clearance basis)

Source: Korea Customs Service & Ministry of Knowledge Economy (export and import trend)

Trade balance


Exports (customs clearance basis)


5-1

5-2

5-3


18/67

18 January 2010

6. Mining and manufacturing production

Mining and manufacturing production rose 1.4 percent month-on-month in November,

thanks to an export increase and a low base effect from the previous month due to Chuseok

holidays, while year-on-year it surged 17.8 percent

By business category, semiconductors and parts (up 56.3%), chemical products (up 28.0%),

and automobiles (up 14.9% ) posted an increase year-on-year, whereas beverages (down

9.6%) and metalworks (down 2.5%) decreased.

Shipments soared 2.0 percent month-on-month, or 15.3 percent year-on-year, thanks to

brisk shipments of semiconductors and parts, while the level of inventory decelerated a drop

from the previous months 16.2 percent to 14.5 percent.

By business category, the shipments of semiconductors and parts (up 47.1%) and

automobiles (up 18.6%) rose year-on-year, while those of refined petroleum products (down

2.4%) and transportation equipment (down 2.9% ) declined. The inventories of automobiles

(down 30.9% ), primary metals (down 21.4% ), and chemical products (down 21.1% ) went

down.

The average operation ratio of the manufacturing sector registered 77.3 percent, staying at

the same level as the previous month.

Mining and manufacturing production in December is projected to continue an upward track,

as advanced estimates, in particular electricity sales and exports, showed an improvement.

Production (q-o-q, m-o-m)

(y-o-y)

- Manufacturing

Heavy chemical industry

Light industry

Shipment

- Domestic demand

- Exports

Inventory3

Average operation ratio (%)

Production capacity

1. Preliminary 2. Including mining, manufacturing, electricity and gas industry 3. End-period



Mining andmanufacturingactivity2

Manufacturingactivity

20092008

Annual

-

3.0

3.0

4.1

-2.2

2.4

-0.7

7.1

7.3

77.2

5.2

Q3

-1.9

5.6

5.6

6.8

0.0

5.3

1.7

10.3

17.3

78.3

5.3

Nov

-10.1

-13.8

-14.5

-15.0

-12.2

-13.2

-14.0

-11.9

16.1

68.4

3.4

Q2

11.4

-6.2

-6.6

-6.2

-8.8

-5.8

-6.6

-4.7

-16.7

73.7

1.9

Q3

7.2

4.2

4.4

5.6

-1.8

2.1

3.1

0.8

-13.9

78.9

2.8

Sep

5.7

11.0

11.5

12.4

6.5

8.9

12.4

4.3

-13.9

80.2

3.2

Oct1

-3.8

0.2

0.4

1.9

-7.1

-0.6

-1.0

-0.1

-16.2

77.3

3.4

Nov1

1.4

17.8

18.6

21.5

4.4

15.3

13.5

17.7

-14.5

77.3

3.5

Industrial electricity sales (thousand GWh)

18.3 (Sep 2009) 17.7 (Oct) 18.1 (Nov) 19.0 (Dec)1

Exports (US$ billion)


1. Estimate


19/67


Inventory


Average manufacturing operation ratio



Source: Statistics Korea (industrial activity trend)6-1

6-2

6-3


20/67

20 January 2010

7. Service sector activity

Service activity in November 2009 decreased 1.2 percent from the previous month partly due

to the H1N1 flu pandemic. From a year earlier, however, service output expanded 3.3

percent.

By business category, real estate & renting services (up 15.9%), healthcare & social welfare

services (up 11.6%) and wholesale & retail sales (up 5.4%) led the year-on-year increase in

the service sector.

Meanwhile, entertainment, cultural & sports services (down 6.9% ) and professional,

scientific & technical activities (down 3.9%) declined from a year earlier.

Amid robust advanced indicators including credit card spending, service activity in

December 2009 is expected to reverse its course to post a month-on-month increase, mainly

affected by the subdued H1N1 flu pandemic and rising stock prices.


Annual Q3 Q4 Q1 Q2 Q3 Sep Oct1 Nov1

Service activity index

- Wholesale & retail

- Transportation services

- Hotels & restaurants

- Information & communication services

- Financial & insurance services

- Real estate & renting

- Professional, scientific & technical services

- Business services

- Educational services

- Healthcare & social welfare services

- Entertainment, cultural & sports services

- Membership organizations

- Sewerage & waste management

Weight2008 2009

100

22.0

9.0

7.8

8.4

15.3

6.3

4.8

2.9

10.8

6.0

2.9

3.8

0.4

3.4

1.4

4.3

0.7

3.5

9.7

-2.1

2.0

4.6

1.8

6.3

2.2

0.1

5.8

3.2

3.6

4.3

1.7

3.4

9.6

-8.4

1.8

3.2

-0.5

6.1

1.7

-1.4

3.9

-0.4

-4.6

-3.2

-3.0

-0.2

4.5

-7.5

0.9

0.1

2.3

6.5

4.3

-1.0

4.0

-0.4

-4.0

-10.8

-2.4

-1.9

6.6

-3.1

-1.9

-4.8

3.7

8.6

1.5

-3.4

0.5

1.6

-2.2

-9.5

-0.3

0.9

9.8

1.5

3.2

-6.6

6.9

8.1

0.9

-5.0

8.8

2.2

0.3

-4.1

-2.2

1.5

8.7

9.3

0.1

-1.1

-2.6

9.8

0.1

-1.7

5.5

4.4

3.3

0.4

0.0

3.2

9.4

9.7

3.0

-1.2

-0.3

11.4

4.7

1.9

9.6

3.3

5.4

2.6

-2.0

1.4

4.5

15.9

-3.9

-2.4

0.2

11.6

-6.9

-3.5

0.3

1.3

1.9

-2.5

-2.7

1.5

4.0

14.3

-2.9

-0.5

-7.0

11.4

-6.6

-0.8

-3.5

1. Preliminary


Value of credit card use (y-o-y, %)

10.9 (Aug 2009) 14.7 (Sep) 9.4 (Oct) 18.3 (Nov) 20 (Dec)1

KOSPI (monthly average)

1,630 (Oct 2009) 1,583 (Nov) 1,647 (Dec)

1. Estimate


21/67


November 2009 service industry by business

Source: Statistics Korea (service industry activity trend)

Wholesale and retail sales


Service industry

Source: Statistics Korea (service industry activity trend)7-1

7-2

7-3

Totalin

dex

Who

lesal

e&retail

Tran

sportatio

n

Hotels

&re

staurants

Informa

tion&

comm

unica

tions

Real

estate

&renting

Professional,s

cientifi

c&

technic

alservice

s

Busin

essfacilit

ymanag

ement&

busin

esssupport

servi

ces

Education

alservi

ces

Healthc

are&

socialw

elfa

re

servi

ces

Ente

rtainm

ent,

cultu

ral&

sports

servi

ces

Membe

rship

organiz

atio

ns,repair

&

othe

rpersonals

ervic

es

Sewe

rage

,waste

mana

geme

nt,m

aterials

recovery&

remedia

tiona

ctivities

Finan

cial&

insuran

ceservi

ces


22/67

22 January 2010

8. Employment

The number of workers on payroll in November 2009 declined by 10,000 from a year earlier

as hiring in the agriculture, forestry & fishery dropped significantly.

Employment in the manufacturing sector continued to decrease mainly due to sluggishexports. The pace of decline in the sector, however, decelerated to 43,000. Hiring in the

construction sector stayed on a downward track with a 115,000 decrease as employment in

the private sector remained weak. Employment in the service sector soared by 294,000

driven by the governments job creation policies. Meanwhile, the number of employed in the

agriculture, forestry & fishery plunged 151,000 as fall cultivation declined while the

temperature dropped.

By status of workers, non-wage workers including self-employed workers plummeted by

424,000 from a year earlier. In the mean time, wage workers rose by 413,000 led by an

increase of 492,000 in regular workers and 186,000 in temporary workers, although the

number of daily workers shrank by 264,000.

The employment rate stood at 59.1 percent, down 0.8 percentage points compared to the

same month of the previous year. The unemployment rate rose 0.2 percentage points year-

on-year to 3.3 percent, while that of youths aged 15 to 29 was up 1.5 percentage points from

a year earlier to 7.6 percent.

Unemployment rate (%)

Employment rate (%)

(Change from same period in previous year, thousand)

20092008

Annual

3.2

59.5

Nov

3.1

59.9

Q1

3.4

58.5

Q2

3.1

60.3

Q3

3.1

59.9

Q4

3.1

59.4

Q1

3.8

57.4

Q2

3.8

59.3

Q3

3.6

59.1

Oct

3.2

59.3

Nov

3.3

59.1


Employment growth

- Manufacturing

- Construction

- Services

- Agriculture, forestry & fishery

- Wage workers

Regular workers

Temporary workers

Daily workers

- Non-wage workers

Self-employed workers

(Change from same period in previous year, thousand)

20092008

Annual

145

-52

-37

263

-37

236

386

-93

-57

-92

-79

Nov

78

-86

-32

150

42

159

318

-103

-56

-81

-83

Q1

209

-18

-22

307

-63

312

435

-98

-25

-102

-79

Q2

173

-34

-46

300

-54

289

448

-96

-63

-115

-67

Q3

141

-52

-40

262

-38

208

347

-83

-56

-66

-76

Q4

54

-103

-41

187

8

137

316

-94

-85

-83

-95

Q1

-146

-163

-43

47

14

73

318

-136

-108

-220

-197

Q2

-134

-151

-113

155

-25

175

313

-5

-133

-309

-286

Q3

-1

-143

-103

269

-25

356

386

125

-155

-357

-276

Oct

10

-87

-147

269

-29

376

490

136

-250

-367

-266

Nov

-10

-43

-115

294

-151

413

492

186

-264

-424

-307



23/67


Share of employed by industry


Number of employed and employment growth

Source: Statistics Korea (service industry activity trend)8-1

8-2

8-3 Unemployment rate and number of unemployed



24/67

24 January 2010

9. Financial market

9.1 Stock market

The Korean stock market in December 2009 was up amid global market rallies andexpectations over an economic recovery.

Investor sentiment in the market was boosted as Koreas GDP in the third quarter expanded

3.2 percent from the previous quarter posting the highest quarter-on-quarter growth in 90

months while the IMF upgraded its forecasts for Koreas economic growth for 2009 and 2010

to 0.25 percent and 4.5 percent, respectively, from initial estimates of minus 1 percent and

3.6 percent.

Despite liquidity problems of Kumho Asiana Group, the Korean stock market rallies

continued until the end of the year, mainly affected by a Korean consortiums gaining of the

nuclear-plant contract with the United Arab Emirate (UAE).

Foreign investors led domestic stock market rallies by continuing their net-buying of Korean

shares since July, although the market was in a wait-and-see mode toward the end of the

year.

9.2 Exchange rate

The won/dollar exchange rate in December rose 1.7 won from 1,162.9 won at the end of

November to wrap up the month at 1,164.5 won.

The exchange rate dropped to 1,153 won, the lowest this year, on December 4 as did on

November 18, as fear eased over Dubais debt default crisis. It, thereafter, turned to anincrease as investors appetite for safe assets grew as downgrades of Greeces sovereign

credit rating fueled concerns over credit risks in the eurozone.

The won/yen exchange rate fell to the 1,200 won range with worries about deflation in

Japan.

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.

(End-period)

Dec Dec Dec Nov Dec Change1

Won/Dollar 929.8 936.1 1,259.5 1,162.8 1,164.5 8.2

Won/100Yen 783.4 828.6 1,396.8 1,348.8 1,264.5 10.5

Nov 2009 Dec 2009 Change1 Nov 2009 Dec 2009 Change1

Stock price index

Market capitalization

Average daily trade valueForeign stock ownership

1. Change from the previous month

2006 2007 2008 2009

KOSPI KOSDAQ

(End-period, point, trillion won)

1,555.6

818.5

4.032.7

1,682.8

887.3

4.532.7

127.2 (8.2%)

68.8 (8.4%)

0.5 (12.5%)0.0 (0.0%)

464.3

75.4

1.67.3

513.1

85.2

2.07.4

48.8 (10.5%)

9.8 (13.0%)

0.4 (25.0%)0.1 (5.8%)


25/67


Foreign exchange rate (month-end)

Stock prices9-1

9-2

9-3 Recent foreign exchange rate


26/67

26 January 2010

9.3 Bond market

Treasury bond yields were up in December due to less demand for safe assets with global

stock market rallies and expectations over an economic rebound.

Despite the Bank of Koreas decision to keep its policy rate unchanged, the yieldsaccelerated the growth pace, as foreign investors made a net selling of KTB futures amid an

improvement of economic indicators such as industrial activities.

9.4 Money supply & money market

The M2 (monthly average) in October expanded 9.9 percent from a year earlier excluding

cash management accounts (CMAs), which were included in M2 since July 2009. The year-

on-year M2 growth was higher than the previous months 9.5 percent, as financial

institutions are likely to have hiked their deposit rates to attract matured deposits.

Bank deposits in November increased driven by time deposits which expanded at a faster

pace with the inflow of massive corporate funds fueled by deposit rate hikes.

Asset management company (AMC) deposits shifted to an increase as financial institutions

short-term idle money flowed into the deposits while money withdrawals from equity funds

declined.

Dec Dec Dec Dec Oct Nov Dec Change1

Call rate (1 day) 3.76 4.60 5.02 3.02 2.01 2.01 2.01 0

CD (91 days) 4.09 4.86 5.82 3.93 2.79 2.79 2.88 9

Treasury bonds (3 yrs) 5.08 4.92 5.74 3.41 4.44 4.10 4.44 34

Corporate bonds (3 yrs) 5.52 5.29 6.77 7.72 5.58 5.21 5.56 35

Treasury bonds (5 yrs) 5.36 5.00 5.78 3.77 4.94 4.61 4.98 37

(End-period)

1. Basis point changes in December 2009 from the previous month

20092008200720062005

Bank deposits

AMC deposits

(Monthly change, end-period, trillion won)

1. Balance at end November 2009, trillion won

2007 2008 2009

Annual

59.6

61.8

Nov

11.2

14.3

Annual

104.3

63.0

Nov

9.4

2.8

Sep

16.5

-18.3

Oct

-6.8

-7.3

Nov

1.5

4.4

Nov1

1,015.8

342.9

M1+2

M2

Lf3

(Percentage change from same period in previous year, average)

1. Balance at end October 2009, trillion won

2. M1 excluding corporate MMFs and individual MMFs while including CMAs

3. Liquidity aggregates of financial institutions (mostly identical with M3)

4. Balance at end September 2009, trillion won

2009

Annual

-5.2

11.2

10.2

2007 2008

Annual

-1.8

14.3

11.9

Q1

-12.4

13.3

11.6

Q4

5.0

13.8

11.2

Q2

-0.1

15.3

12.8

Q3

2.1

14.7

12.1

Oct

4.2

14.2

11.9

Q1

10.8

11.5

8.8

Q2

17.6

10.1

7.3

Aug

18.5

9.5

7.6

Oct

19.6

9.9

Lower7

Oct1

371.5

1,543.4

1,965.34

Sep

19.5

9.5

7.3


27/67


Total money supply


Interest rates

Source: The Bank of Korea9-4

9-5

9-6 Share of deposits by financial sector (M3 as of year-end)


* Retail finance: Mutual savings banks & National Credit Union Federation of Korea, Others: Investment banks, post office savings, etc.


28/67

28 January 2010

10. Balance of payments

Koreas current account recorded a US$4.28 billion surplus in November.

The goods account surplus exceeded US$5 billion for three consecutive months since

September 2009 as the trade balance continued to post a surplus.

The surplus expanded to US$5.84 billion from US$5.68 billion a month earlier. The service

account deficit increased to US$1.66 billion from the previous months US$1.31 billion, as

deficits swelled in the travel balance and fee payments such as payments for patent rights.

The income account surplus reduced to US$390 million from US$560 million of the previous

month as dividend and interest payments increased.

The current transfer account deficit was up to US$290 million from the previous months

US$160 million with increased outward remittance.

The capital and financial account in November posted a net inflow of US$1.54 billion.

The direct investment account expanded the net outflow to register US$2.84 billion from the

previous months deficit of US$510 million as outbound foreign direct investment (FDI) by

locals increased while inward FDI by foreigners decreased.

The portfolio investment account decreased the net inflow to record US$3.39 billion fromUS$6.13 billion a month earlier as foreign investment in the Korean bond market declined.

The financial derivatives account turned to a net inflow of US$850 million from a net outflow

of US$570 million in the previous month as payments related to overseas financial

derivative transactions decreased.

The other investment account reversed its course to post a surplus of US$190 million after

recording a deficit of US$3.48 billion a month earlier as financial institutions collected short-

term foreign currency-denominated lending from overseas.

The current account is likely to record a surplus of around US$2 billion in December as the

trade balance posted a surplus of US$3.30 billion.

Current account

- Goods balance

- Service balance

- Income balance

- Current transfers

(US$ billion)

20092008

Capital & financial account balance (US$ billion)

-1.44 (Q1 2009) 8.68 (Q2) 14.40 (Q3); 1.58 (Oct) 1.54 (Nov)

Annual

-5.78

5.67

-16.67

5.90

-0.67

Q1

-4.87

-1.38

-4.94

1.98

-0.53

Q2

-0.41

5.53

-4.46

-0.52

-0.96

Q3

-8.33

-3.23

-5.84

1.50

-0.76

Q4

7.83

4.75

-1.44

2.94

1.58

Q1

8.62

8.31

-1.93

0.92

1.31

Q2

13.10

17.58

-4.17

0.29

-0.60

Q3

10.40

14.70

-5.33

1.69

-0.66

Oct

4.76

5.68

-1.31

0.56

-0.16

Nov

4.28

5.84

-1.66

0.39

-0.29

Jan-Nov

41.15

52.11

-14.40

3.86

-0.41



29/67


30/67

11. Prices and international commodity prices

11.1 Prices

Consumer prices in December 2009 increased 0.4 percent month-on-month while rising 2.8percent year-on-year.

The overall price index was up 0.4 percent month-on-month as prices for agricultural,livestock and fishery products gained strength and a price adjustment increased personalservice charges in the year-end. Prices of agricultural, livestock and fishery products rose 2.8percent from the previous month due to decreased supply affected by cold wave and higherstorage cost.

Prices of agricultural, livestock & fishery products in December 2009 (m-o-m, %)Rice (-1.9), radish (0.7), Chinese cabbage (-6.4), cucumber (50.3), lettuce (36.3), mandarin orange (-11.1),

Korean beef (1.5), pork (3.1), mackerel (5.6), scabbard fish (4.1), Alaska pollack (3.1)

Despite stabilized international oil prices, prices of oil products increased 0.2 percent from a monthearlier affected by LPG price increases in December.

Prices of oil products in December 2009 (m-o-m, %)Gasoline (-0.5), diesel (-0.7), kerosene (-0.3), LPG for automobiles (5.4), LPG for kitchen use (4.4)

Public utility charges remained at a similar level to the previous month as an increase in local publicutility charges was offset by falling medical service fees followed by expanded medical insurancecoverage.

Due to higher expenses for dining-out affected by beef price increases and strong demand for year-end parties on top of a peak price tariff introduced in the tourism and lodging industry during thehigh season, personal service charges rose 0.3 percent month-on-month.

Core consumer prices, which exclude the prices of oil and agricultural products, rose by 2.2 percentyear-on-year. Consumer prices for basic necessities, a barometer of perceived consumer prices, wereup 3.3 percent compared to the same month of the previous year.

Consumer price inflation in major sectors

Publicutility

Industrialproducts

Oilproducts

TotalAgricultural,

livestock & fisheryproducts

Housingrents

Personalservices

Month-on-Month (%)

Contribution (%p)

Year-on-Year (%)

Contribution (%p)

0.4

0.35

2.8

2.80

2.8

0.23

3.4

0.28

0.1

0.03

4.6

1.42

0.2

0.01

11.9

0.63

0.2

0.02

1.2

0.11

0.0

0.00

1.8

0.29

0.3

0.09

2.0

0.71

30 January 2010


Consumer price inflation


2008 2009

Month-on-Month (%)

Year-on-Year (%)

Core consumer prices (y-o-y)

(m-o-m)

Consumer prices for basicnecessities (y-o-y)

Dec

0.0

4.1

5.6

0.5

3.0

Jan

0.1

3.7

5.2

0.2

2.8

Feb

0.7

4.1

5.2

0.4

3.3

Mar

0.7

3.9

4.5

0.4

3.1

Apr

0.3

3.6

4.2

0.2

3.0

May

0.0

2.7

3.9

0.2

1.8

Jun

-0.1

2.0

3.5

0.1

0.5

Jul

0.4

1.6

3.2

0.2

0.4

Aug

0.4

2.2

3.1

0.1

1.3

Sep

0.1

2.2

2.7

0.1

1.7

Oct

-0.3

2.0

2.6

0.1

1.5

Nov

0.2

2.4

2.5

0.2

2.3

Dec

0.4

2.8

2.2

0.1

3.3


31/67


Contribution to consumer price inflation

Source: Statistics Korea (consumer price trend)

Prices

Source: Statistics Korea (consumer prices, core inflation) & The Bank of Korea (producer prices)

11-1

11-2

11-3

Consumer price inflation

Source: Statistics Korea (consumer price trend)


32/67

32 January 2010

11.2. International oil and commodity prices

Before rising to the high-US$70s affected by strong demand for heating oil in the month-end,

international oil prices in December tumbled to remain around US$70 a barrel as the US

dollar gained strength. The monthly average oil prices turned to a fall for the first time in three

months.

Despite the wons deppreciation, domestic prices of oil products inched down month-on-

month as weak international oil product prices by mid-December were reflected with the

time lag.

Prices of non-ferrous metals in December continued to rise while international prices of grain

rose due to Chinas increased demand.

Prices of non-ferrous metals increased with expectations of economic recovery in 2010

rather than fundamental factors including demand and supply conditions. Aluminum prices

grew at double digit with the spreading recognition that it remained relatively undervalued

compared to other non-ferrous metals.

Corn and soybean prices rose due to deteriorating weather conditions and increasing

demand from China while the wheat price increase is limited by favorable supply and

demand dynamics.

Prices of non-ferrous metals and grain in December 2009 (m-o-m, %)

Corn (3.0), wheat (0.2), soybean (2.4), bronze (4.8), aluminum (11.7), nickel (0.6), zinc (8.6), lead (1.2), tin (4.9)

(Won/liter, period average)

Annual Annual Annual Jun Jul Aug Sep Oct Nov Dec

Gasoline prices 1,526 1,692 1,601 1,607 1,639 1,670 1,681 1,627 1,655 1,646

Diesel prices 1,273 1,614 1,397 1,389 1,428 1,447 1,453 1,409 1,452 1,441

2007 2008 2009

Source: Korea National Oil Corporation

Record high oil prices (spot prices, US$/barrel)

Dubai crude: 141 (Jul 4, 2008), Brent crude: 145 (Jul 3), WTI crude: 146 (Jul 14)

(US$/barrel, period average)

Dubai crude

Brent crude

WTI crude

2007 2008 2009

Annual

68.4

72.8

72.3

Annual

94.3

97.5

99.9

Annual

61.9

61.7

61.9

Jun

69.4

68.6

69.7

Jul

65.0

64.6

64.2

Aug

71.4

72.9

71.1

Sep

67.7

67.5

69.4

Oct

73.2

72.8

75.8

Nov

77.7

76.7

78.1

Dec

75.5

74.5

74.5

Source: KOREAPDS

(Period average)Reuters index*

Annual Annual Annual Jun Jul Aug Sep Oct Nov Dec

2,400 2,536 2,079 2,117 2,082 2,159 2,147 2,197 2,243 2,294

200920082007

* A weighted average index of 17 major commodities Source: KOREAPDS

Reuters index*


33/67


International oil prices (Dubai crude) and import prices

Source: Korea National Oil Corporation & Korea Customs Service

International oil prices

Source: Korea National Oil Corporation11-4

11-5

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.


34/67

34 January 2010

12. Real estate market

12.1 Housing market

In December 2009, nationwide apartment sales prices were up 0.2 percent month-on-month,

decelerating the pace of increase for three straight months. Compared with the end of 2008,apartment prices rose 1.6 percent. Apartment sales prices in the Seoul metropolitan areawere down for the first time since March 2009 as property transactions in major areas suchas Gangnam (down 0.1%), Seocho (down 0.1%), and Gwacheon (down 0.7%) continued tocontract. On the other hand, apartment sales prices in other cities, especially Busan (up0.8%) and Daejeon (up 0.7%), increased relatively significantly.

The rental prices have slowed down the growth pace for the third month in a row with thebeginning of the winter low season, by rising 0.3 percent from the previous month. From theend of 2008, rental prices were up 4.5 percent. The rental prices in Gangnam (up 0.8%),Seocho (up 1.2%), and Songpa (up 0.7%) remained strong.

Apartment sales transactions in November decreased 6.6 percent from 87,329 a monthearlier to post 81,589. The transactions were up 52.1 percent from a year earlier and down8.3 percent compared with the monthly average recorded in the same month for the past 3years.

Source: Korea Land Corporation

(Monthly average, thousand)Apartment sales transactions

Nationwide

2006 2007 2008 2009

Annual

94

Nov

152

Annual

84

Nov

80

Annual

74

Nov

54

Dec

57

Jan

49

Feb

60

Mar

79

Apr

76

May

72

Jun

81

Jul

91

Aug

81

Sep

90

Oct

87

Nov

82

(Percentage change from previous period)Nationwide apartment sales prices

Nationwide

SeoulGangnam2

Gangbuk3

Seoul metropolitan area

5 metropolitan cities

Other cities

1. Weekly trends 2. Upscale area of southern Seoul 3. Northern Seoul Source: Kookmin Bank

2006 2007 2008 2009

Annual

13.8

24.127.6

19.0

24.6

2.1

3.0

Annual

2.1

3.60.5

8.3

4.0

-0.6

0.3

Annual

2.3

3.2-1.9

9.4

2.9

1.0

2.3

Dec

-0.5

-1.6-2.0

-1.3

-1.4

-0.3

-0.3

Annual

1.6

2.63.9

0.9

0.7

2.8

2.2

Q1

-1.2

-1.3-1.1

-1.7

-1.8

-0.7

-0.3

Q2

0.4

1.01.7

0.2

0.5

0.3

0.3

Q3

1.5

2.63.1

2.0

1.8

1.3

0.8

Q4

0.9

0.30.2

0.4

0.2

1.9

1.5

Oct

0.4

0.30.3

0.4

0.3

0.6

0.5

Nov

0.3

0.00.0

0.1

0.0

0.8

0.6

Dec

0.2

0.00.0

0.0

-0.1

0.5

0.4

Dec211

0.03

0.000.00

0.00

-0.02

0.09

0.08

Dec71

0.05

-0.01-0.01

-0.01

-0.03

0.19

0.08

Dec141

0.03

-0.01-0.01

0.00

-0.03

0.08

0.12

Dec281

0.03

0.010.04

-0.02

-0.01

0.10

0.05

(Percentage change from previous period)Nationwide apartment rental prices

Nationwide

Seoul

Gangnam2

Gangbuk3

Seoul metropolitan area

5 metropolitan cities

Other cities

1. Weekly trends 2. Upscale area of southern Seoul 3. Northern Seoul Source: Kookmin Bank

2006 2007 2008 2009

Annual

7.6

11.5

11.3

11.8

11.7

3.0

4.1

Annual

1.9

2.2

0.5

4.6

2.1

1.1

2.2

Annual

0.8

-1.8

-3.6

0.5

-0.4

1.6

2.6

Dec

-1.4

-2.7

-0.9

-2.4

-2.2

-0.4

-0.5

Annual

4.5

8.1

10.4

5.4

5.6

3.9

2.9

Q1

-1.3

-0.8

-0.1

-1.6

-1.8

-0.9

-0.4

Q2

0.9

1.8

2.4

1.0

1.4

0.4

0.5

Q3

2.8

4.7

5.1

4.2

4.1

1.9

1.0

Q4

2.0

2.3

2.7

1.9

1.8

2.6

1.8

Oct

0.9

1.1

1.1

1.1

1.0

0.8

0.5

Nov

0.8

0.8

1.0

0.6

0.7

1.1

0.7

Dec

0.3

0.4

0.5

0.2

0.1

0.7

0.5

Dec211

0.08

0.12

0.18

0.04

0.04

0.15

0.11

Dec71

0.09

0.14

0.25

0.00

0.02

0.21

0.13

Dec141

0.09

0.08

0.10

0.07

0.04

0.14

0.17

Dec281

0.08

0.01

0.20

-0.01

0.06

0.13

0.09


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Apartment prices by region

Source: Kookmin Bank (national housing price trend)

Weekly apartment sales prices and monthly transaction volume

Source: Kookmin Bank (weekly APT price trend) & Korea Land Corporation (monthly land trade trend)

Real estate prices

Source: Kookmin Bank (national housing price trend)12-1

12-2

12-3


36/67

36 January 2010

12.2 Land market

Nationwide land prices in November rose 0.30 percent, the same level as the previous

month, continuing the moderate recovery pace since April 2009. The accumulated increase

rate from January to November was 0.61 percent, with land prices standing below the record

high in October 2008 by 3.5 percent.

In the Seoul metropolitan area, Seoul continued to slow the upward pace while Incheon and

Gyeonggi province continued to post high price increases rising by 0.55 percent and 0.47

percent, respectively.

In addition, price increases in other cities, especially Daegu (up 0.35%) and North

Gyeongsang province (up 0.33%), accelerated the growth pace.

Nationwide land transactions in November expanded 39.0 percent or 58,000 land lots from a

year earlier to 207,000 land lots. In terms of gross area, land transactions were up 39.9

percent.

Nationwide land transactions excluding Daegu (down 26.1%) increased year-on-year.

Particularly, land transactions in Daejeon (up 98.0%), Gangwon province (up 74.2% ), andBusan (up 69.4%) soared.

(Monthly average, land lot, thousand)Land sales transactions

Nationwide

Seoul

Gyeonggi

Incheon

2007 2008 2009

Annual

208

33

49

13

Annual

208

26

45

13

Sep

173

20

37

11

Oct

191

23

36

10

Nov

148

14

28

8

Dec

162

13

31

8

Jan

134

13

26

7

Feb

164

15

34

7

Mar

207

20

41

9

Apr

207

24

48

10

May

192

22

45

9

Jun

215

27

49

10

Jul

222

26

50

11

Aug

206

25

48

10

Nov

207

19

48

11

Sep

226

28

56

13

Oct

212

25

52

14


Land price increases in Seoul metropolitan (m-o-m, %)

0.41 (Sep 2009) 0.37 (Oct) 0.36 (Nov)

Land price increases in other cities (m-o-m, %)

0.09 (Aug 2009) 0.12 (Sep) 0.16 (Oct) 0.21 (Nov)

(Percentage change from previous period)Land prices by region

Nationwide

SeoulGyeonggi

Incheon

2007 2008 2009

Annual

3.88

5.884.22

4.86

Q1

0.96

1.381.07

1.24

Q2

0.79

1.070.89

1.28

Q3

0.91

1.401.05

1.12

Q4

1.15

1.901.14

1.13

Annual

-0.31

-1.00-0.26

1.37

Q1

1.23

1.831.28

1.36

Q2

1.46

2.171.57

1.67

Q3

1.18

1.591.28

2.01

Q4

-4.08

-6.34-4.28

-3.57

Q1

-1.20

-1.38-1.62

-1.39

Q2

0.35

0.680.37

0.53

Q3

0.88

1.301.13

1.16

Oct

0.30

0.300.42

0.51

Nov

0.30

0.240.47

0.55



37/67


Land trade volume

Source: Korea Land Corporation (land trade trend)

12-4

12-5

12-6

Land and consumer prices since 1970s

Source: Korea Land Corporation (land prices) & Statistics Korea (consumer prices)

Land prices by region

Source: Korea Land Corporation (land price trend)


38/67

38 January 2010

13. Composite indices of business cycle indicators

The coincident composite index was up 0.3 percent in November from the previous month

while the cyclical indicator of coincident composite index remained unchanged.

Three out of all components of the index including the volume of imports decreased. The

value of construction completed, the mining & manufacturing production index, the

domestic shipment index, and the number of non-farm payroll employment were up.

The year-on-year leading composite index, which foresees the future economic conditions,

went up 1.3 percentage points month-on-month in November. The 12-month smoothed

change in leading composite index increased 1.2 percentage points month-on-month,

running on an upward track since January.

The value of received construction orders, the value of machinery orders received, the

indicator of inventory cycle, the ratio of job openings to job seekers, the volume of capital

goods imports, and the composite stock price index were up.

Components of coincident composite index in November 2009 (m-o-m)

Value of construction completed (2.5%), mining & manufacturing production index (1.0%), domestic shipment

index (0.7%), number of non-farm payroll employment (0.1%), service activity index (0.0%), manufacturing

operation ratio index (-0.1%), wholesale & retail sales index (-0.7%), volume of imports (-0.9%)

Components of the leading composite index in November 2009 (m-o-m)

Value of received construction orders (27.4%), value of machinery orders received (12.7%), indicator of

inventory cycle (5.7%p), ratio of job openings to job seekers (3.4%p), volume of capital goods imports (0.5%),

composite stock price index (0.3%), liquidity in the financial institutions (0.3%), net terms of trade index

(0.1%), spreads between long & short term interest rates (0.0%p), consumer expectations index (-1.0%p)

Coincident composite index (m-o-m, %)

Cyclical indicator of coincident composite index

(m-o-m, p)

Leading composite index (m-o-m, %)

12 month smoothed changein leading composite index (%)

(m-o-m, %p)

1. Preliminary

2009

1. Preliminary

Jan

-1.9

92.4

-2.2

0.3

-4.0

0.1

Feb

0.0

92.0

-0.4

1.1

-2.9

1.1

Aug

0.9

96.7

0.5

1.0

9.1

1.3

Sep

0.6

96.9

0.2

0.7

10.1

1.0

Oct1

0.4

96.8

-0.1

1.1

11.3

1.2

Nov1

0.3

96.8

0.0

1.3

12.5

1.2


39/67


Coincident and leading composite indices


13-1

13-2

13-3

Cyclical indicator of coincident composite index


Leading composite index



40/67

The proposed revision of the labor union law was passed by the National Assembly, which

limits wage payment for full time unionists and allows multiple unions at one workplace.

Background

Banning corporations from paying wages to full time union members and allowing multiple

unions at one workplace have been controversial for 13 years, although both of them need

to be adopted to help improve Koreas labor-management relations. The revised labor union

law regulates details concerning ban on paying full time union members and multiple unions

at one workplace, which aim to guarantee as much freedom as possible to companies and

unions, while at the same time be in line with the principles of labor-management relations.

Main contents of the revision

1. Banning corporations from paying full time union members

Although full time union members are allowed when employers agree or collective

agreements approve, they are required to be paid not by companies but by unions.Corporations paying full time labor union members will be punished for not complying with

the law. However, the revised labor union law provides some flexibility to the wage payment

system for labor unionists.

The revision allows unionists to be paid by corporations through the time-off system, in

which employees receive time off payment when they are engaged in union activities

considered relevant to the common interests of the union and management, such as

collective bargaining and job site safety, or when the activities are considered essential for

operating the union. The ceiling of time off for union activities is set by the deliberation

committee, based on the number of union members in a worksite.

40 January 2010

Labor Union Law Revised

Policy Issues


41/67

The deliberation committee is composed of 10 members, five appointed by the business

circle and labor community, and five by the government. The existing time off ceilings are

examined every three years to decide whether to keep the current limits or revise them. The

deliberation committee is required to decide on the first time off ceiling by April 30, 2010,

otherwise the five members appointed by the government will set the ceiling.

10 million won or less penalty will be imposed on strikes which demand wage payment to

full time unionists beyond the time off ceiling, even if wage demand is not a major issue of a

strike, but one of the agenda of a strike. Existing agreements will be in force until they

expire, although the revised law has taken effect since January 1, 2010.

2. Multiple unions in one workplace

Multiple unions will be allowed in one workplace from July 1, 2010, but they are required to

use a single negotiation channel when they bargain with employers. The revised law

regulates ways and procedures to set up a single body representing multiple unions, as the

representative body, if set up in a fair and reasonable way, will increase negotiation

efficiency and minimize chances of strife between employers and employees.

The procedure to set up a representative body starts when one of the multiple unions calls

for a negotiation with the employer. Each union is entitled to call for a negotiation before the

existing collective agreement expires, and employers are required to announce the call to

give all unions in the company an equal opportunity to be a representative body. The

negotiation union is chosen by unions in the company, or if the unions fail to select their

representative body, the union with more than half of the total corporate union members

represents the other unions. In the process, the unions are allowed to unite to be a majority

union, or become part of a larger union.

If the unions fail to have a representative body with more than half of the total corporate

union members, they need to create a new negotiation body. The unions of which the

number of members exceeds 10 percent of the participants in the negotiation union

selecting process can qualify for being a part of the new representative body. If this fails

again, the Labor Relations Commission will set up a negotiation body, reflecting the numberof members in each union.

The negotiation body represents all union members in a company or workplace, without

being affected by industrial unions or craft unions. However, the revised law allows separate

negotiation bodies when there are major differences in working conditions, employment

types, and negotiation styles. The Labor Relations Commission decides on whether separate

negotiation bodies are necessary, and separate bodies are set up with the same procedures

as those for setting up general negotiation bodies. Employers as well as unions are allowed

to request a separate negotiation body.



42/67

The negotiation union is responsible for fairly representing the other unions: It is required to

listen to minority unions before or during a negotiation. Employers are also responsible for

taking part in a negotiation without any bias. If the negotiation union fails to be a fair

representative body, the union claiming to be treated unfairly reports the case to the Labor

Relations Commission within three months from the incident. The commission then ordersremoval of unfairness if any unequal treatment is detected.

Terms regulating walkouts and time off union activities are added to the revision: Staging a

strike requires consent from more than half of the total union members, but individual

unions are not entitled to deciding on a strike. Only a representative union decides on

strikes. Union activities taken as time off work are set through a negotiation between a

representative union and an employer, or by the Labor Relations Commission.

42 January 2010


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Government to frontload 70% of 2010 estimated expenditure

Korea will spend some 70 percent of the 2010 estimated expenditure during the first half of

the year in an effort to accelerate the economic recovery, the Ministry of Strategy and Finance

said on January 4, 2010. The spending plan covering both the general and special accounts is

as follows:

Some 178.4 trillion won of the governments planned annual expenditure of 255.3 trillion won

will be spent during the period, from which a total of 164 trillion won will be spent to create

jobs, stabilize low-income households, and support on-going SOC projects.

The spending plan was released along with the budget spending guidelines, the purposes of

which are: (i) to facilitate early spending; (ii) to help reduce energy consumption in public

institutions by 10 percent; and (iii) to enhance transparency and efficiency in budget

spending.


EconomicNews Briefing

(Trillion won, %)

Annual Q1 Q2 Q3 Q4

Budget 255.3 109.8 68.6 44.8 32.1

Spending rate (accumulated) 43.0 69.8 87.4 100.0

2010 budget plan


44/67

44 January 2010

Asia to launch Chiang Mai Initiative Multilateralization (CMIM) in March

Korea, China, Japan, and 10 member states of the Association of Southeast Asian Nations

(ASEAN+3) completed the signing of the Chiang Mai Initiative Multilateralizaton (CMIM)Agreement on December 24, 2009 to launch the pact on March 24, 2010.

The CMIM will strengthen the regions capacity to safeguard against increased risks and

challenges in the global economy. The core objectives of the CMIM are (i) to address

balance-of-payments and short-term liquidity difficulties in the region and (ii) to supplement

the existing international financial arrangements.

The initial amount of the multilateral currency swap fund will be US$120 billion. The CMIM

will provide financial support through currency swap transactions to the CMIM participants

facing balance-of-payments and short-term liquidity difficulties. Participating countries are

entitled to swap its own currency into US dollars in accordance to their contributions.

Korea to further develop Knowledge Sharing Program (KSP)

The Knowledge Sharing Program (KSP), a comprehensive policy consultation program

launched by the Ministry of Strategy and Finance to share Koreas development experience

with other countries, will be further advanced in 2010 to provide more systematic assistanceto developing countries.

With Koreas accession to the OECD Development Assistance Committee (DAC) last

November ahead of chairing the G20 Summit this year, Korea plans to improve its official

development assistance (ODA) system and establish an original Korean assistance model as

a part of its contribution to the international society. In this regard, the Korean government

will upgrade KSP in a more systematized way in 2010 while expanding aid volume to

developing countries.

(End-period, %)

US$ (billion) (%) US$ (billion)

China1 38.40 32 19.20

Japan 38.40 32 19.20

Korea 19.20 16 19.20

ASEAN 24.00 20 63.10

Financial contribution Maximum amount of available funds

1. Hong Kong is included

CMIM contributions and maximum amount of available funds


45/67


The 2010 KSP will be directed in ways as follows: (i) 20 cases of Koreas economic

development experience to be selected and developed into programs; (ii) consultants and

consulting firms specializing in KSP to be introduced; (iii) the link between KSP and

untied/tied aid to be strengthened to fully support developing countries; (iv) joint

consultation with international organizations to be accompanied by Koreas official financialaid; and (v) comprehensive consultation to be provided to 4 countries in 2010 from only one

country in 2009.

Microcredit program starts from December 2009

The Miso Credit Foundation, a microcredit lending program in Korea to support low

income households, opened its first branch on December 15, 2009 as Samsung has set up

the first office of Microcredit foundation in Suwon. Other non-financial companies including

Hyundai-Kia Automotive, SK, LG, POSCO and Lotte have also launched their microcredit

foundations in December 2009. In the banking sector, Kookmin, Woori, Shinhan, Hana and

Industrial Bank of Korea (IBK) have embarked their foundations.

The Miso Credit Foundation plans to open some 50 branches by May 2010 and gradually

expand branches up to 300 through 2010. In addition, 11 regional units of Miso Credit

Foundation are to kick off by February 2010.

Names of foundation Dates of establishment

Samsung Miso Credit Foundation December 15, 2009

Kookmin Miso Credit Foundation

December 17, 2009Woori Miso Credit Foundation

Shinhan Miso Credit Foundation

Hyundai-Kia Automotive Miso Credit Foundation December 18, 2009

LG Miso Credit FoundationDecember 21, 2009

Hana Miso Credit Foundation

SK Miso Credit Foundation December 23, 2009

Posco Miso Credit Foundation December 24, 2009

Lotte Miso Credit Foundation December 28, 2009

IBK Miso Credit Foundation December 30, 2009

Current situation of Miso Credit Foundation


46/67

46 January 2010

Korean group wins landmark UAE nuclear power deal

A Korean consortium, on December 27, 2009, won a landmark deal valued at about US$20.4

billion to build four nuclear reactors for the United Arab Emirates (UAE), in a high-profilecontest with a French consortium led by Areva, an industry leader, and a US-Japanese

consortium including General Electric and Hitachi. The victory for the Korea Electric Power

(Kepco) led consortium marks the first international deal for Korea, which built its first

commercial nuclear plant in 1987, making the nation the worlds sixth exporter of the nuclear

reactors after the US, France, Canada, Russia and Japan. The deal is expected to secure

stepping stone for the countrys advance into the fast-growing international market for

nuclear power plants.

The Kepco led group also includes Hyundai Engineering and Construction, Samsung C&T,

Doosan Heavy Industries and Construction as well as Westinghouse, a US-based unit of

Japans Toshiba. According to the deal, the Korean consortium will build four 1,400-

megawatt nuclear power units in the UAE that will be completed from 2017 to 2020. The

Korean group expects to earn another US$20 billion by jointly operating the reactors for 60

years, and hopes to build more plants in the UAE beyond 2020 to meet future demand.

The Ministry of Knowledge Economy attributed the Korean consortiums winning of the UAE

deal to its cost-effectiveness, high safety standards, technological know-how and relatively

short period of construction. President Lee Myung-baks aggressive diplomacy also

contributed to the success of Koreas nuclear power plant export, which was highlighted in

his surprise trip to Abu Dhabi on December 26 to support the Korean firms.

At a summit with President Sheikh Khalifa bin Zayed al-Nahayan in Abu Dhabi on December

27, 2009, President Lee said the contract will deepen relations between Korea and the UAE

in the economic, cultural, security and diplomatic sectors. The two leaders also agreed to

continue developing the relationship between the countries into a strategic partnership to

help ensure their joint development in the future.

Koreas trade surplus hits all-time high in 2009

Koreas trade balance posted a record high US$40.98 billion surplus in 2009 as exports fell

13.8 percent year-on-year to US$363.77 billion while imports declined 25.8 percent from a

year earlier to US$322.79 billion. Amid the substantial decrease in global trade volume,

Koreas exports performed relatively well, making the nation the ninth largest exporter in

2009. Year-on-year export growth in December, in particular, jumped 33.7 percent from the

previous months 18.1 percent, confirming the upward trend in exports.


47/67

By export item, ships and LCD devices led the healthy export performance by increasing 4.4

percent and 28.5 percent, respectively. By export destination, exports to emerging markets

such as China (down 7.5%) and the Middle East (down 11.7%) declined at a smaller pace

compared with those to developed countries including the US (down 18.9%) and Japan(down 23.7%).

The Korean government forecasts that exports this year will increase around 9 percent from

the previous year to post US$410 billion while imports will climb about 21 percent to register

US$390 billion, resulting in the trade surplus of around US$20 billion.



48/67

48 December 2009


49/67


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

StatisticalAppendices


50/67

50 January 2010

(year-on-year change, %, chained 2005 year prices)

Period

2002 7.2 -2.2 8.7 8.1 7.1 6.2 7.3

2003 2.8 -5.4 5.4 0.5 4.4 8.5 -1.5

2004 4.6 9.1 10.0 1.0 2.1 1.3 3.8

2005 4.0 1.3 6.2 4.6 1.9 -0.4 5.3

2006 5.2 1.5 8.1 5.1 3.4 0.5 8.2

2007 5.1 4.0 7.2 5.1 4.2 1.4 9.3

2008P 2.2 5.5 3.1 1.6 -1.7 -2.1 -2

2002 I 6.6 2.3 5.1 10.3 7.5 11.4 2.6

II 7.0 -2.4 7.2 9.1 7.9 7.2 7.7

III 6.8 -1.1 9.3 7.7 3.2 -1.5 9.8

IV 8.1 -5.5 13.1 5.7 9.6 9.4 9.1

2003 I 3.5 0.7 5.4 2.0 5.1 8.2 2.9

II 1.8 -1.6 3.1 0.3 4.7 8.4 -0.7

III 2.0 -9.6 4.3 0.0 2.8 8.3 -5.8

IV 3.9 -8.0 8.5 -0.4 5.0 9.0 -2.2

2004 I 5.2 8.2 10.9 -0.1 2.3 5.3 -0.6

II 5.9 7.6 12.9 1.3 4.9 4.2 6.4

III 4.8 8.3 10.4 1.0 3.1 1.2 7.7

IV 2.

economic bulletin (vol. 32, no.1)

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