economic bulletin (vol.32 no.3)

8/9/2019 Economic Bulletin (Vol.32 No.3)

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2/71

The Green Book: Current Economic Trends

Overview 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 26

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

10. Balance of payments 30

11. Prices and international commodity prices 32

11.1 Prices11.2 International oil and commodity prices

12. Real estate market 36

12.1 Housing market12.2 Land market

13. Composite indices of business cycle indicators 40

Policy IssuesLee administrations economic achievement for the past two years 42

Economic News Briefing 46

Statistical Appendices 53

Republic of Korea

Economic Bulletin

Vol. 32 | No. 3


3/71

Economic Bulletin 3

The Korean economy overall continued a recovery track, despite some indices becomingstagnant affected by temporary factors such as a heavy snowfall and cold wave, and theexpiration of the tax credit for new car purchases.

Mining and manufacturing production in January remained flat month-on-month, while rising36.9 percent year-on-year. Service output fell 0.8 percent month-on-month due to weakperformance in real estate and rent, education, and leisure businesses, but year-on-year theindex rose 4.6 percent.

Consumer goods sales, while gaining 6.9 percent year-on-year, lost 1.3 percent month-on-month in January due to sluggish sales of durable goods, in particular automobile salesaffected by the expiration of the tax credit for new car purchases.

In January facilities investment dropped 9.8 percent month-on-month as machineryinvestment decreased, but year-on-year the index increased 20.4 percent. Constructioncompleted grew both month-on-month and year-on-year by 12.7 percent and 8.9 percent,respectively, backed by the brisk public sector and civil engineering works.

The total number of workers hired in January gained 5,000 year-on-year. The employmentrate (seasonally adjusted ) posted 58.2 percent, shedding 0.1 percentage point from theprevious month. The unemployment rate jumped to 5.0 percent affected by temporaryfactors, in particular soaring applicants for Hope Employment Program where economically-inactive population such as the aged were counted unemployed persons.

Exports jumped 31.0 percent year-on-year in February, helped by the recovering globaleconomy. Imports soared 36.9 percent year-on-year, as an unusual cold wave increased

crude oil imports.

Consumer prices in February declined back to the 2 percent range, as stabilizing prices ofmanufactured goods such as processed food and petroleum products offset increasingprices of agriculture, livestock and fishery products.

Instability in the financial market grew in February, as stock prices and foreign exchangerates fluctuated affected by rocky international financial markets.

To sum up, amid the global economy steadily recovering, external uncertainties rise asinternational financial markets are vulnerable to fiscal difficulties in some Europeancountries and policies taken by the US and China.

The Korean government, to achieve a secure economic recovery, will keep pursuingexpansionary fiscal policies, while renewing its efforts to create jobs. On the other hand, thegovernment will keep an eye on any changes in internal and external situations includinginternational financial markets, and check risks in the Korean economy to timely respond topossible worsening of economic conditions.

The Green BookCurrent Economic Trends

Overview


4/71

4 March 2010

1. Global economy

The global economy has been slowly rebounding, as major countries such as the US, Japan

and European countries continued to grow in the fourth quarter of 2009. There have been

some moves toward liquidity control such as the US discount rate hike and Chinas further

increase in the bank reserve ratio. Concerns about sovereign credit risk from European

countries have been relieved to some degree after Greek governments announcement of

new fiscal austerity plan.

US real GDP was revised upward to 5.9 percent (annualized q-o-q, preliminary) in the fourth

quarter from 5.7 percent (advanced ). The real economy including consumption and

production continued a slow recovery, as industrial production and retail sales rose in

January from the previous month.

The US housing market recovery decelerated in January, despite the S&P/Case-Shiller Home

Price Index inching up 0.3 percent, as existing and new home sales fell 7.2 percent and 11.2

percent, respectively.

The job market slowed its fall, as the unemployment rate improved from the previous

month, landing at 9.7 percent, and non-farm payrolls decreased at a slower pace.

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

18 that it would raise the discount rate by 25 basis points to 0.75 percent from 0.5 and

shorten loan terms to overnight from 28 days. Federal Reserve Chairman Ben Bernanke said,

at the House of Representative hearing on February 24, that the Fed would keep its main

interest rate at an all-time low near zero for an extended period.

US

(Percentage change from previous period)

Annual Q3 Q4 Annual Q1 Q2 Q3 Q4 Jan

Real GDP1

- Personal consumption expenditure

- Corporate fixed investment

- Construction investment for housing

Industrial production

Retail sales

New home sales

New non-farm payroll employment(thousand) 2

Consumer prices (y-o-y, %)

2008 2009 2010

1. Annualized rate (%)

2. Monthly average

Source: US Department of Commerce

0.4

-0.2

1.6

-22.9

-1.8

-0.8

-37.4

-302

3.8

-2.7

-3.5

-6.1

-15.9

-2.3

-1.5

-9.8

-334

5.2

-5.4

-3.1

-19.5

-23.2

-3.4

-6.8

-15.0

-651

1.5

-2.4

-0.6

-17.9

-20.4

-9.8

-6.0

-22.8

-398

-0.3

-6.4

0.6

-39.2

-38.2

-5.2

-1.3

-13.5

-753

-0.2

-0.7

-0.9

-9.6

-23.3

-2.7

-0.1

9.9

-478

-0.9

2.2

2.8

-5.9

18.9

1.6

1.6

9.2

-260

-1.6

5.9

1.7

6.5

5.0

1.6

1.9

-8.9

-103

1.5

-

-

-

-

0.9

0.5

-11.2

-20

2.6


5/71

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


6/71

6 March 2010

The Chinese government further raised the bank reserve ratio on February 25, aiming tostabilize asset prices, amid increasing domestic demand and expanding exports. TheManufacturing Purchasing Managers Index (PMI) in January stayed above the benchmark 50for the 12th consecutive month, but compared with the previous month, it fell 3.8 points.

Japans economy grew 1.1 percent quarter-on-quarter in the fourth quarter, maintainingrecovery momentum, as exports increased and facility investment rebounded. Exportssurged, thanks to a low base effect from the previous year and growing demand from therecovering global economy.

The eurozone economy showed a slow recovery, posting 0.1 percent quarter-on-quartergrowth in the fourth quarter, as Germanys GDP stayed flat and Italys economy contracted0.2 percent. Greek government's announcement on March 3 of additional deficit cuts worth4.8 billion euros (US$6.6 billion) alleviated the countrys sovereign debt concerns to somedegree.

China

Japan

(Percentage change from same period in previous year)

Real GDP

Fixed asset investment (accumulated)

Retail sales


Exports

Consumer prices

Producer prices

2008 2009 2010

Annual

9.0

26.1

21.6

12.9

17.2

5.9

6.9

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

Annual

8.7

30.5

15.5

11.0

-15.9

-0.7

-5.4

Q1

6.2

28.6

14.9

5.1

-19.7

-0.6

-4.6

Q2

7.9

33.6

15.0

9.2

-23.5

-1.5

-7.2

Q3

9.1

33.3

15.4

12.4

-20.7

-1.3

-7.7

Q4

10.7

30.5

16.9

18.0

0.2

0.7

-2.1

Jan

-

-

-

-

21.0

1.5

4.3

Source: China National Bureau of Statistics

Manufacturing PMI (y-o-y, %)

54.0 (Aug 2009) 54.3 (Sep) 55.2 (Oct) 55.2 (Nov) 56.6 (Dec) 55.8 (Jan 2010) 52.0 (Feb)

Eurozone

Source: Eurostat

Real GDP


Retail sales

Exports (y-o-y, %)Consumer prices (y-o-y, %)

2008 2009 2010


Annual

0.8

-1.8

-0.7

3.63.3

Q3

-0.4

-2.0

-0.4

5.33.8

Q4

-1.9

-7.8

-1.1

-4.92.3

Annual

-4.0

-14.9

-2.2

-18.10.3

Q1

-2.5

-8.3

-0.8

-20.91.0

Q2

-0.1

-1.4

-0.2

-23.20.2

Q3

0.4

1.9

-0.1

-19.4-0.4

Q4

0.1

0.2

-0.2

-8.40.4

Jan

-

-

-0.3

-1.0

Source: Japan's Statistics Bureau and Statistics Centre

Real GDP

Industrial and mining production

Retail sales (y-o-y, %)

Exports (y-o-y, %)


2008 2009 2010


Annual

-0.7

-3.4

0.3

-3.5

1.4

Q3

-1.1

-3.3

0.8

3.2

2.2

Q4

-3.0

-17.7

-1.5

-23.1

1.0

Annual

-5.0

-22.3

-2.2

-33.1

-1.4

Q1

-3.2

-17.2

-3.9

-46.9

-0.1

Q2

1.3

14.6

-0.9

-38.5

-1.0

Q3

0.0

5.9

-3.4

-34.4

-2.2

Q4

1.1

4.7

-0.7

-8.0

-2.0

Jan

-

2.5

2.6

40.8

-1.3


7/71

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


8/71

8 March 2010

2. Private consumptionPrivate consumption (advanced estimates of GDP) in the fourth quarter of 2009 edged down0.1 percent quarter-on-quarter but increased 5.6 percent year-on-year.

Consumer goods sales in January 2010 dropped 1.3 percent month-on-month, negativelyaffected by weak sales of durable goods including automobiles and non-durable goods, butrose 6.9 percent year-on-year.

Durable goods sales continued an upward trend year-on-year, soaring 39.8 percent, but fell5.7 percent month-on-month due to a drop in automobile sales as the tax break for new carpurchases expired.

Non-durable goods sales decreased 2.0 percent month-on-month or 5.2 percent year-on-year, as gasoline sales dropped due to a cold wave and heavy snow.

Sales at department stores and specialized retailers jumped 6.5 percent and 10.9 percentyear-on-year, respectively, whereas those at large discounters posted a 9.0 percent year-on-year drop.


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 2010

Annual

1.1

-1.6

-3.5

-3.0

1.4

Q4

-4.2

-3.6-9.6

-21.0

-10.7

0.2

Annual1

2.6

-8.1

21.8

0.3

1.2

Q1

-4.7

1.0-11.9

-20.6

-1.5

-1.4

Q2

1.5

5.15.7

20.1

-0.6

0.5

Q3

2.8

0.37.9

24.1

-0.7

1.9

Q41

10.8

4.133.9

76.9

3.4

4.1

Nov

9.7

0.540.7

113.3

0.3

1.5

Dec 1

12.7

1.245.8

92.0

7.2

1.5

Jan 1

6.9

-1.339.8

73.0

5.2

-5.2


Annual Q4 Annual1 Q1 Q2 Q3 Q41 Nov Dec1 Jan 1

- Department stores

- Large discounters

- Specialized retailers2

2008 2009 2010

1. Preliminary

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


1.2

2.5

-1.8

-4.3

-1.0

-8.2

3.3

-2.0

2.9

-0.8

-4.4

-6.6

0.4

-2.9

2.6

4.2

-3.4

3.5

9.1

3.2

12.6

3.2

-1.3

12.6

14.7

5.4

14.1

6.5

-9.0

10.9


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

-

Q3

1.4

0.0

Q4

-3.7

-4.6

Annual

0.2

-

Q1

-4.4

0.4

Q2

-0.8

3.6

Q3

0.8

1.5

Q4

5.6

-0.1


9/71

Economic Bulletin 9

Consumer goods sales

Source: Statistics Korea (industrial activity trend)

Private consumption

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

2-2

2-3 Consumer goods sales by type



10/71

10 March 2010

Consumer goods sales in February are projected to rebound from a month earlier, given anincreased demand during the Lunar New Year holidays, improvements in advancedestimates, and recovering consumer spending, with the year-on-year index continuing toimprove due to a low base effect from the previous year.

Domestic credit card spending rose 21.2 percent year-on-year, posting a 20 percent range

increase for three consecutive months since December 2009 when the index first landed at20 percent.

Sales at department stores jumped 14.5 percent year-on-year, adding 9.7 percentage pointsto the January figure. Sales at large discounters sharply rebounded by 31.3 percent year-on-year in February, after the previous months fall of 13.4 percent.

Domestic sales of Korean automobiles in February contracted month-on-month due to theexpiration of the tax break for new car purchases and Lunar New Year holidays, whileincreasing 21.3 percent year-on-year.

Gasoline sales turned positive in four months, thanks to an increasing demand during theLunar New Year holidays.

Gradually improving employment and subdued inflation is expected to help recovery inprivate consumption.

The Consumer Sentiment Index, which slightly decreased in February but stayed above thebenchmark 100, is also projected to positively affect private consumption.

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

14.7 (Sep 2009) 9.4 (Oct) 18.3 (Nov) 20.0 (Dec) 20.2 (Jan 2010) 21.2 (Feb)

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


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

-6.0 (Sep 2009) 4.5 (Oct) -2.8 (Nov) 3.9 (Dec) -13.4 (Jan 2010) 31.3 (Feb)

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


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

-0.3 (Sep 2009) 20.7 (Oct) -3.0 (Nov) -4.5 (Dec) -0.6 (Jan 2010) 9.4 (Feb)

Source: Ministry of Knowledge Economy

The Credit Finance Association

Korea Automobile Manufacturers Association

Korea National Oil Corporation

Ministry of Strategy and Finance (for February data)

Number of workers hired (y-o-y, ten thousand)7.1 (Sep 2009) 1.0 (Oct) -1.0 (Nov) -1.6 (Dec) 0.5 (Jan 2010)


2.0 (Oct 2009) 2.4 (Nov) 2.8 (Dec) 3.1 (Jan 2010) 2.7 (Feb)

Consumer Sentiment Index (CSI)

114 (Sep 2009) 117 (Oct) 113 (Nov) 113 (Dec) 113 (Jan 2010) 111 (Feb)

Domestic sales of Korean automobiles (ten thousand units)

13.1 (Oct 2009) 13.7(Nov) 15.7 (Dec) 11.9 (Jan 2010) 10.7 (Feb)


11/71

Economic Bulletin 11

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


Domestic automobile sales

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


12/71

12 March 2010

3. Facility investment

Facility investment (advanced estimates of GDP ) in the fourth quarter of 2009 posted a

quarter-on-quarter increase of 4.7 percent, and a year-on-year gain of 12.9 percent.

Facility investment in January rose 20.4 percent year-on-year but the index fell 9.8 percent

month-on-month, affected by a high base effect from the previous month and seasonalfactors which caused machinery investment such as semi-conductors to fall by 12.7 percent.

Facility investment in February is expected to increase from the previous month, given

improvements in leading indicators such as machinery orders and imports, corporateinvestment confidence and facility investment adjustment pressure.


Facility investment1


- Machinery

- Transportation equipment

1. National accounts 2. Percentage change from previous period


2007 2008 2009

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

Q4

12.9

4.7

-

-


Facility investment


- Machinery

- Transportation equipment

Domestic machinery orders

- Public

- Private

- Machinery imports

Facility investmentadjustment pressure3

1. Preliminary


3. Production growth rate minus production capacity growth rate in the manufacturing sector (%p)

Sources: Statistics Korea & The Korea International Trade Association

2007 2008 2009 2010

Annual

8.2

-

7.5

11.3

20.6

-11.4

24.5

22.1

1.7

Annual

-3.0

-

-4.2

2.1

-13.8

5.0

-15.5

6.4

-1.7

Annual1

-8.0

-

-12.9

12.0

-11.8

61.7

-19.9

-16.6

-4.0

Q1

-17.9

-10.2

-22.1

0.1

-35.5

150.8

-44.8

-27.9

-19.1

Q2

-12.9

5.6

-18.9

11.8

-17.7

29.9

-22.3

-27.4

-8.9

Q3

-10.0

2.4

-17.0

20.0

3.4

280.2

-16.0

-15.9

1.2

Q41

10.2

13.9

8.8

15.5

20.0

-27.2

35.2

-7.2

12.8

Jan

-21.1

-4.5

-22.2

-16.4

-49.1

56.5

-54.4

-33.6

-29.9

Nov

10.2

5.9

7.2

21.5

56.2

110.1

45.5

21.6

14.9

Dec1

21.1

5.9

19.5

27.4

21.2

-44.5

52.4

24.7

31.5

Jan 1

20.4

-9.8

15.1

41.7

11.3

-27.1

18.0

34.8

34.4


Oct Nov Dec Jan Feb Mar

Business survey indices (base=100) for 100 96 98 103 101 103manufacturing facility investment projections

2009 2010


13/71


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


14/71

14 March 2010

4. Construction investment

Construction investment (advanced estimates of GDP) in the fourth quarter of 2009 rose

3.9 percent year-on-year, while remaining unchanged quarter-on-quarter.

Construction completed (current value) in January rose 8.9 percent year-on-year or 12.7

percent month-on-month thanks to an increase in SOC budget spending which affected

public sector performance. Both building construction and civil engineering works climbed

8.6 percent and 9.2 percent, respectively, from the previous year.

Construction investment in February is expected to be negatively affected by a high base

effect from the previous month, despite improving leading indicators such as construction

orders and business survey indices.


Construction investment2


- Building construction

- Civil engineering works

1. Preliminary

2. National accounts



2007 2008 2009

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

Q4

3.9

0.0

-

-


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 2010

Annual

6.6

-

8.4

4.6

23.6

40.3

16.5

13.3

Annual

4.9

-

6.5

2.2

-7.6

10.0

-14.3

-20.1

Annual1

3.3

-

21.2

-5.7

3.0

60.9

-21.9

-12.9

Q1

4.3

8.1

24.5

-5.3

-12.0

33.1

-37.3

-31.6

Q2

6.4

0.7

31.9

-5.9

-1.1

182.9

-60.2

-32.7

Q3

-1.2

-6.3

21.3

-11.8

7.6

78.9

-14.3

-4.6

Q41

3.7

3.4

10.7

0.4

11.6

11.6

17.3

13.1

Jan

-0.5

15.0

25.2

-11.4

0.3

64.4

-31.2

-48.3

Nov

3.2

-0.7

8.1

1.7

78.8

63.3

92.5

14.1

Dec1

12.9

1.4

18.3

9.8

-19.6

-33.9

-9.6

42.7

Jan 1

8.9

12.7

11.6

7.6

17.1

-14.7

49.4

33.3

Source: The Construction and Economy Research Institute of Korea

Oct Nov Dec Jan Feb

Business survey indices (base=100) for 110.8 90.1 83.6 74.8 91.4construction projections

2009 2010


15/71


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


16/71

16 March 2010

5. Exports and imports

Exports in February rose 31.0 percent year-on-year to US$33.27 billion.

Exports, while staying on a positive track backed by the recovering global economy, grew at

a slower pace compared with the previous month, as the number of working days decreased

by 1.5 days with the Lunar New Year holidays falling on February instead of January.

Working-day-adjusted daily average exports rose to US$1.62 billion from the previous

months US$1.38 billion, helped by soaring vessel exports from US$1.9 billion to US$5 billion.

By export category, semiconductors (up 118.4%) and liquid crystal devices (up 60.3%) made

great strides, and by regional category, exports to Central and South America (up 62.2%)

and China (up 43.2%) surged.

Imports in February jumped 36.9 percent year-on-year to US$30.94 billion, accelerating an

increase from the previous month, due to a low base effect, rising imports of crude oil by

56.9 percent and petroleum products by 102.5 percent, backed by a cold wave, and the

recovering economy. Average daily imports in working-day-adjusted-terms increased from

the previous months US$1.4 billion to US$1.51 billion. Imports of capital goods, raw

materials and consumer goods all expanded greatly year-on-year.

The trade balance in February shifted back to the black from the previous months deficit of

US$460 million, posting a surplus of US$2.33 billion.

Raw materials (y-o-y, %)

-42.8 (Q2, 2009) -39.3 (Q3) -2.3 (Q4); 25.4 (Jan 2010) 42.8 (Feb)

Capital goods (y-o-y, %)

-23.6 (Q2, 2009) -13.7 (Q3) 8.2 (Q4); 30.3 (Jan 2010) 29.3 (Feb)

Consumer goods (y-o-y, %)-24.4 (Q2, 2009) -20.9 (Q3) 4.6 (Q4); 21.3 (Jan 2010) 27.1 (Feb)

(US$ billion)

Exports

(y-o-y, %)

Average daily exports

Imports

(y-o-y, %)

Average daily imports

2009 2010

Annual

363.53

-13.9

1.30

323.09

-25.8

1.16

Q1

74.42

-25.2

1.10

71.42

-32.7

1.06

Q2

90.36

-21.1

1.30

74.00

-35.6

1.06

Q3

94.78

-17.6

1.32

84.84

-31.0

1.18

Q4

103.97

11.7

1.49

92.85

1.4

1.33

Jan

21.13

-34.5

0.98

24.90

-31.4

1.16

Feb

25.40

-18.5

0.91

22.60

-30.7

1.03

Jan

31.01

46.7

1.38

31.47

26.4

1.40

Feb

33.27

31.0

1.62

30.94

36.9

1.51

Source: Korea Customs Service

(US$ billion)

Trade Balance

2009 2010

Annual

40.45

Q1

3.00

Q2

16.39

Q3

9.94

Q4

11.12

Jan

-3.77

Feb

2.80

Jan

-0.46

Feb

2.33Source: Korea Customs Service


17/71


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


18/71

18 March 2010

6. Mining and manufacturing production

Mining and manufacturing production remained steady month-on-month in January, while

rising 36.9 percent year-on-year due to a low base effect from the same period of the

previous year.

By business category, semiconductors and parts (up 80.1%), automobiles (up 83.1%), and

primary metals (up 50.5% ) posted an increase year-on-year, whereas refined petroleum

products (down 5.8%) and beverages (down 2.2%) decreased.

Shipments, led by semiconductors and parts, continued to improve, posting a 32.4 percent

increase year-on-year and 0.8 percent month-on-month, while the level of inventory fell at a

slightly slower pace year-on-year from 7.5 percent to 4.0 percent.

By business category, the shipments of semiconductors and parts (up 77.8% ), and

automobiles (up 79.0% ) rose year-on-year, while those of cigarettes (down 3.3% ) and

refined petroleum products (down 0.7% ) declined. The inventories of apparels (down

32.5%), non-metal minerals (down 20.2%), and primary metals (down 9.6%) fell.

The average operation ratio of the manufacturing sector was 78.8 percent, down 0.9

percentage points from a month earlier.

Mining and manufacturing production in February is projected to remain steady considering

advanced indices such as exports and industrial electricity sales.

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

2009 20102008

Annual

-

3.4

3.0

4.4

-1.6

2.6

-0.4

7.2

7.1

77.5

5.1

Annual1

-

-0.7

-0.9

0.1

-5.7

-1.7

-1.8

-1.7

-8.0

74.6

3.1

Q3

6.8

4.3

4.4

5.7

-2.4

2.1

3.3

0.4

-14.2

78.8

3.2

Q4 1

1.3

16.2

16.8

20.0

1.7

12.8

12.4

13.3

-8.0

78.4

4.0

Jan

2.9

-25.7

-27.3

-28.1

-22.9

-23.6

-24.3

-22.6

-0.1

62.8

2.6

Nov

1.8

18.0

18.8

21.9

3.6

15.4

13.9

17.5

-14.6

78.2

3.9

Dec1

2.4

34.3

36.0

41.5

11.6

26.2

26.2

26.1

-8.0

79.7

4.5

Jan 1

0.0

36.9

38.9

43.5

17.7

32.4

26.1

34.4

-4.0

78.8

4.5

Industrial electricity sales (thousand GWh)

17.7 (Oct 2009) 18.1 (Nov) 19.1 (Dec) 19.4 (Jan 2010) 17.2 (Feb) 1

Exports (US$ billion)


1. Estimate


19/71


Average manufacturing operation ratio


6-1

6-2

6-3



Inventory



20/71

20 March 2010

7. Service sector activity

Service activity in January 2010 decreased 0.8 percent month-on-month due to sluggish

educational services and real estate & renting services. From a year earlier, service output

expanded 4.6 percent.

By business category, finance & insurance services (up 2.8%), business services (up 2.6%)

led the month-on-month increase in service activity.

On the other hand, educational services (down 7.9%) and real estate & rental (down 6.6%)

declined from a month earlier.

Service activity in February 2010 is expected to slightly increase from a month earlier.

Amid robust expectations on wholesale & retail sales as well as advertisement &

broadcasting services affected by the lunar New Years holidays and Winter Olympics,

improved labor market conditions also served as a positive factor.


Annual Q4 Annual Q1 Q2 Q3 Q4 Nov Dec1 Jan 1

Service activity index

- Wholesale & retail

- Transportation services

- Hotels & restaurants

- Information & communication services

- Financial & insurance services

- Real estate & renting

- Professional, scientific & technical activities

- 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

3.6

1.3

4.3

0.7

3.3

9.7

-2.1

2.0

4.4

1.7

8.7

2.2

0.1

5.8

0.0

-4.7

-3.2

-3.0

-0.8

4.5

-7.5

0.9

0.0

7.4

8.7

3.3

-1.0

4.0

2.0

-0.4

-6.6

-1.5

0.7

8.0

5.3

1.0

-3.0

2.8

10.4

-0.5

-2.4

3.7

-0.3

-4.8

-12.7

-2.6

-1.4

6.9

-4.2

-1.7

-4.9

9.4

8.9

1.4

-3.8

0.1

2.4

-2.2

-10.0

-0.6

1.6

10.3

-2.2

3.8

-6.2

16.5

8.9

0.7

-4.8

9.0

1.9

0.3

-4.8

-2.5

1.4

9.0

6.7

0.0

-0.8

-3.7

10.4

0.0

-1.4

6.0

3.6

5.4

1.4

-0.2

1.4

5.7

21.6

1.6

-0.2

-9.6

13.2

-3.8

0.1

-0.2

4.6

5.8

11.6

3.2

0.7

8.9

8.6

0.4

3.0

-12.1

14.0

2.0

2.2

5.9

4.2

5.4

2.5

-1.9

1.5

5.3

21.3

-2.4

-1.3

2.1

12.5

-6.6

-2.2

2.3

6.9

8.9

4.8

3.6

1.4

7.7

25.9

7.7

0.6

-3.3

14.9

2.6

2.8

0.3

1. Preliminary


Initial claims for unemployment benefits (thousand)

67.1 (Oct 2009) 70.2 (Nov) 93.7 (Dec) 139.7 (Jan 2010) 88 (Feb)

2010


21/71


December 2009 service industry by business

Source: Statistics Korea (service industry activity trend)

7-1

7-2

7-3

Totali

ndex

Who

lesale

&retail

Tran

sportatio

n

Hotels

&re

staurants

Information

&comm

unica

tions

Real

estate

&renting

Professional,s

cientifi

c&

technic

alservi

ces

Busin

essfacilit

ymanag

ement&

busin

esssupport

service

s

Education

alservi

ces

Healthc

are&

socialw

elfar

e

servi

ces

Ente

rtainm

ent,

cultu

ral&

sports

servi

ces

Membe

rship

organiz

ation

s,repair

&

othe

rpersonals

ervic

es

Sewe

rage

,waste

mana

geme

nt,mate

rials

recovery&

remedia

tiona

ctivities

Finan

cial&

insuran

ceservi

ces

Service industry


Wholesale and retail sales



22/71

22 March 2010

8. Employment

The number of workers on payroll in January 2010 increased by 5,000 from a year earlier,

while the employment rate fell by 0.7 percentage points to 56.6 percent.

Employment in construction (down 81,000), and agriculture, forestry & fishery (down160,000 ) stayed on a downward track, while hiring in the manufacturing (up 29,000 ) and

service sector (up 213,000) increased. Manufacturing employment rose due to an increase in

both production and exports. Employment in construction continued to decline, although

decelerating the pace. Hiring in services soared as a result of the recovery of domestic

consumption and expanded expenditure. Employment in agriculture, forestry & fishery

sector tumbled with lower temperature and heavy snowfalls.

Wage workers rose by 244,000 led by an increase of 609,000 in regular workers, although

the number of daily workers plunged by 244,000. Non-wage workers including self-

employed workers (down 113,000), however, plummeted by 240,000 from a year earlier. In

the mean time, male workers (up 91,000 ) and workers in their fifties (up 233,000)significantly increased.

Number of employed (million)

Employment rate (%)

(seasonally adjusted)

Employment growth (y-o-y, thousand)

(Excluding agriculture, forestry & fishery)

- Manufacturing

- Construction

- Services

- Agriculture, forestry & fishery

- Wage workers

Regular workers

Temporary workers

Daily workers

- Non-wage workers

Self-employed workers

- Male

- Female

- 15 to 29

- 30 to 39

- 40 to 49

- 50 to 59

- 60 or more

2009 20102008

Annual

23.58

59.5

59.5

145

182

-52

-37

263

-37

236

386

-93

-57

-92

-79

96

48

-119

-26

64

207

18

Q3

23.75

59.9

59.5

141

179

-52

-40

262

-38

208

347

-83

-56

-66

-76

92

49

-114

-36

92

169

30

Q4

23.64

59.4

59.2

54

46

-103

-41

187

8

137

316

-94

-85

-83

-95

43

12

-166

-92

56

206

50

Annual

23.51

58.6

58.6

-72

-34

-126

-91

186

-38

247

383

22

-158

-319

-259

31

-103

-127

-173

-24

198

54

Q1

22.90

57.4

58.8

-146

-160

-163

-43

47

14

73

318

-136

-108

-220

-197

-23

-124

-212

-159

8

193

23

Jan

22.86

84.8

59.0

-11.8

-

-127

-41

57

15

21

287

-134

-133

-123

-112

-19

-84

-240

-113

28

197

25

Q2

23.74

59.3

58.6

-134

-109

-151

-113

155

-25

175

313

-5

-133

-309

-286

24

-158

-99

-213

-27

156

49

Q3

23.75

59.1

58.7

-1

24

-143

-103

269

-25

356

386

125

-155

-357

-276

34

-34

-123

-169

-30

211

109

Q4

23.63

58.7

58.5

-6

110

-49

-107

264

-116

413

492

186

-264

-424

-307

89

-94

-77

-149

-46

230

37

Jan

22.87

56.6

58.2

165

-

29

-81

213

-160

244

609

-121

-244

-240

-113

91

-9

14

-81

-56

233

-105



23/71


Share of employed by industry

Source: Statistics Korea (employment trend)

8-1

8-2

8-3 Share of employed by status of workers


Number of employed and employment growth



24/71

24 March 2010

The number of the unemployed in January 2010 climbed by 368,000 year-on-year to record

1,216,000, and the unemployment rate rose by 1.1 percentage points to 5.0 percent.

The number of female workers who have lost jobs (up 214,000 ) increased at a faster pace

than that of male workers unemployed (up 154,000) in January.

The unemployment rate was high among employers in their fifties and sixties or over as

applicants for public works allotted to seniors were categorized as economically active

population.

The economically inactive population in January 2010 was up 150,000 from a year earlier to

post 16,310,000. Meanwhile, the labor force participation rate was up 0.1 percentage pointyear-on-year to 59.6 percent. Workers quit jobs due to childcare & housework (up 190,000)

and old ages (up 190,000) surged while those who stayed away from work to take a rest

(down 231,000) significantly decreased.

Number of unemployed (thousand)

Unemployment growth (y-o-y, thousand)

- Male

- FemaleUnemployment rate (%)

(Seasonally adjusted)

- Youth aged 15 to 29

- Middle school graduate or under

- High school graduate

- College, univ. graduate or over

2009 20102008

Annual

769

-14

-12

-1

3.2

3.2

7.2

2.2

3.8

3.0

Q3

752

-5

1

-6

3.1

3.2

6.9

2.1

3.8

2.9

Q4

757

24

25

-1

3.1

3.2

7.0

2.1

3.8

2.9

Annual

889

119

80

40

3.6

3.6

8.1

2.5

4.4

3.5

Jan

848

73

66

8

3.6

3.3

8.2

3.0

4.4

3.0

Q1

908

107

83

24

3.8

3.5

8.6

2.9

4.5

3.6

Q2

943

176

116

60

3.8

3.9

8.0

2.6

4.6

3.7

Q3

886

134

95

39

3.6

3.7

8.1

2.2

4.6

3.3

Q4

817

60

25

36

3.3

3.5

7.6

2.3

4.0

3.2

Jan

1,216

368

154

214

5.0

4.8

9.3

7.1

5.2

3.8


Labor force participation rate (%)

Economically inactive population (million)

Growth in economically inactive

population (y-o-y, thousand)

- Engaged in family duties

- Retired

- Rest

2009 20102008

Annual

61.5

15.25

297

123

76

31

Q3

61.8

15.15

289

134

104

-27

Q4

61.3

15.37

372

112

59

99

Annual

60.6

15.70

447

188

88

123

Jan

59.5

16.16

506

147

55

149

Q1

59.7

16.09

514

209

52

162

Q2

61.7

15.35

445

173

102

112

Q3

61.3

15.53

374

119

105

94

Q4

60.7

15.83

456

250

92

123

Jan

59.6

16.31

150

190

190

-231



25/71


Unemployment rate and youth unemployment rate


8-4

8-5

8-6 Unemployment rate by education


Employment rate



26/71

26 March 2010

9. Financial market

9.1 Stock market

The Korean stock market in February 2010 slightly fell adversely affected by unfavorablefactors in the global economy. Global investor sentiment has been chilled as uncertainty

over global monetary policy rose as the US and China moved to absorb liquidity. On

February 18, the Federal Reserve Board (Fed) raised the discount rate by 25 basis points

while Chinas central bank lifted the reserve requirement ratio by 50 basis points on

February 16.

Worries over the Greek debt crisis persisted as European finance ministers failed to spell out

concrete measures to aid Greece and credit rating agencies, S&P and Moodys, hinted that

they may downgrade Greeces sovereign debt rating.

Due to the flight to safety assets, foreign investors shifted to a net-buying position onKorean shares for the first time since February 2009.

9.2 Exchange rate

The won/dollar exchange rate as of the end of February 2010 fell 1.8 won from 1,161.8 won at

the end of January to wrap up the month at 1,160.0 won.

The exchange rate has shown higher volatility fluctuating in the 1,140 to 1,170 won range due

to external factors such as credit concerns in the eurozone and Dubai and the Feds discount

rate hike, rather than internal factors.

The won/yen exchange rate rose 5.8 won from 1,293.2 won to 1,299.0 won due to growingdemand for safe assets including yen affected by sovereign debt woes in Greece and other

eurozone countries.

Jan 2010 Feb 2010 Change1 Jan 2010 Feb 2010 Change1

Stock price index

Market capitalization

Average daily trade value

Foreign stock ownership

1. Change from the end of the previous month

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 Dec Jan Feb Change1

Won/Dollar 929.8 936.1 1,259.5 1,164.5 1,161.8 1,160.0 0.4

Won/100Yen 783.4 828.6 1,396.8 1,264.5 1,293.2 1,299.0 -2.7

2006 2007 2008 2009 2010

KOSPI KOSDAQ

(End-period, point, trillion won)

1,602.4

848.1

6.2

32.5

1,594.6

844.1

4.0

32.1

-7.9(-0.5%)

-43.2(-4.4%)

-2.2(-35.5%)

-0.4(-1.2%)

496.6

84.8

3.2

7.6

507.3

84.4

2.3

7.5

10.5(2.1%)

-0.4(-0.5%)

-0.9(-28.1%)

-0.1(-1.3%)


27/71


9-1

9-2

9-3 Recent foreign exchange rate

Foreign exchange rate (month-end)

Stock prices


28/71


29/71


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.


30/71

30 March 2010

10. Balance of payments

Koreas current account recorded a US$450 million deficit in January 2010.

The goods account surplus decreased significantly to post US$1.55 billion from the previous

months US$4.02 billion as the trade account shifted to a deficit.

Although the travel account deficit expanded, the service account deficit was down to

US$2.16 billion from the previous months US$2.80 billion as the business service deficit fell.

The income account surplus declined to record US$470 million from US$700 million a month

earlier due mainly to reduced dividend income.

The current transfer account deficit edged down to US$300 million from the previous

months US$400 million with decreased outward remittance.

The capital and financial account in January 2010 posted a net inflow of US$5.07 billion.

The direct investment account expanded the net outflow to register US$1.68 billion from the

previous months deficit of US$1.37 billion mainly as inbound foreign direct investment (FDI)

was down.

The portfolio investment account decreased the net inflow to record US$100 million from

US$970 million a month earlier as foreign investment in the Korean stock market declined.

The net inflow in the financial derivatives account was down to post US$320 million from

US$990 million in the previous month as payments related to overseas financial derivative

transactions increased.

The other investment account increased the surplus to US$6.40 billion from the previous

months US$1.01 billion as domestic financial institutions temporary borrowings from

overseas were up.

The current account is likely to record a surplus of around US$1 billion in February 2010 as

the trade account registered a US$2.33 billion surplus.

Capital & financial account balance (US$ billion)

-1.40 (Q1 2009) 8.68 (Q2) 14.40 (Q3) 4.77 (Q4); 1.64 (Dec) 5.07 (Jan 2010)

Current account

- Goods balance

- Service balance

- Income balance

- Current transfers

(US$ billion)

2009 20102008

Annual

-5.78

5.67

-16.67

5.90

-0.67

Annual

42.67

56.13

-17.20

4.55

-0.81

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

Q4

10.56

15.54

-5.78

1.65

-0.86

Nov

4.28

5.84

-1.66

0.39

-0.29

Dec

1.52

4.02

-2.80

0.70

-0.40

Jan

-0.45

1.55

-2.16

0.47

-0.30



31/71


Capital & financial account balance

Source: The Bank of Korea (balance of payments trend)

Travel balance

Source: The Bank of Korea (balance of payments trend)

Current account balance

Source: The Bank of Korea (balance of payments trend)10-1

10-2

10-3


32/71

32 March 2010

11. Prices and international commodity prices

11.1 Prices

Consumer prices in February 2010 increased 2.7 percent year-on-year, decelerating from theprevious months 3.1 percent with price stabilization of processed foods and oil products,although prices of agricultural, livestock and fishery products stayed on an upward track. Froma month earlier, consumer prices were up 0.4 percent.

Prices of agricultural, livestock and fishery products increased driven by productsvulnerable to cold weather. The price was also boosted by increased demand during theLunar New Year holidays which shifted from January in 2009 to February in 2010.

Prices of agricultural, livestock & fishery products in Feb 2010 (m-o-m, %)Chinese cabbage (46.0), apple (13.3), cucumber (26.5), pumpkin (26.4), bell pepper (22.0), scallion (14.7),

lettuce (-34.5), strawberry (-5.7), pork (-1.8), rice (-1.0)

Prices of oil products decreased 0.2 percent from a month earlier as the wons appreciation wasreflected with time lag while international oil prices went down.

Prices of Dubai crude (US$/barrel)

71.4 (Aug 2009) 67.7 (Sep) 73.2 (Oct) 77.7 (Nov) 75.5 (Dec) 76.8 (Jan 2010) 73.6 (Feb)

Public utility charges remained unchanged month-on-month without noticeable priceadjustments. Personal service charges were up 0.3 percent from the previous month due toseasonal factors such as the school vacation, moving season and winter heating demand.

Core consumer prices, which exclude the prices of oil and agricultural products, rose by 1.9 percentyear-on-year. Consumer prices for basic necessities, a barometer of perceived consumer prices, wereup 3.4 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

2.7

2.69

2.5

0.22

4.3

0.37

-0.2

-0.05

3.5

1.07

-0.2

-0.01

11.2

0.60

0.2

0.02

1.4

0.13

0.0

0.00

1.9

0.31

0.3

0.12

2.4

0.83


Consumer price inflation


2009

Month-on-Month (%)

Year-on-Year (%)

Core consumer prices (y-o-y)

(m-o-m)

Consumer prices for basicnecessities (y-o-y)

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

Jan

0.4

3.1

2.1

0.1

3.8

Feb

0.4

2.7

1.9

0.2

3.4

2010


33/71


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)


34/71

34 March 2010

11.2. International oil and commodity prices

Average international oil prices in February 2010 decreased month-on-month as the dollar

strengthened amid fiscal woes in some European countries such as Greece.

The prices, however, turned to an increase after mid-February as energy demand for heating

was pushed up by cold weather and heavy snowfalls in the North Eastern region of the US.

In the domestic market, galsoline prices inched up month-on-month backed by the wons

depreciation although international oil prices decreased. Meanwhile diesel prices declined

from the previous month as the prices fell at a steeper pace than gasoline in the

international market.

Monthly average prices of all non-ferrous metals in February decreased from a month earlier

with the exception of nickel whose prices increased due to long-term strikes in the Canadian

nickel mines. Non-ferrous metal prices, however, generally showed an upward trend after

mid-February as concerns over Chinas monetary tightening eased.

International prices of grain including corn, wheat and soybean decreased from the previous

month as robust grain production in South America boosted the grain harvest outlook for

this year. A strong dollar also contributed to a fall in grain prices.

Prices of non-ferrous metals and grain in Feb 2010 (m-o-m, %)

Corn (-5.5), wheat (-6.0), soybean (-4.3), bronze (-7.3), aluminum (-8.2), nickel (3.0), zinc (-11.6), lead (-10.5), tin (-7.6)

(Won/liter, period average)

Annual Annual Annual Aug Sep Oct Nov Dec Jan Feb

Gasoline prices 1,526 1,692 1,601 1,670 1,681 1,627 1,655 1,646 1,661 1,664

Diesel prices 1,273 1,614 1,397 1,447 1,453 1,409 1,452 1,441 1,450 1,443

2007 2008 2009 2010

Source: Korea National Oil Corporation

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

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

(US$/barrel, period average)

Dubai crude

Brent crude

WTI crude

2007 2008 2009 2010

Annual

68.4

72.8

72.3

Annual

94.3

97.5

99.9

Annual

61.9

61.7

61.9

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

Jan

76.8

76.4

78.3

Feb

73.6

73.9

76.5

Source: KOREAPDS

(Period average)Reuters index*

Annual Annual Annual Aug Sep Oct Nov Dec Jan Feb

2,400 2,536 2,079 2,159 2,147 2,197 2,243 2,294 2,343 2,290

2009 201020082007

* A weighted average index of 17 major commodities

Source: KOREAPDS

Reuters index*


35/71


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.

International oil prices (Dubai crude) and import prices

Source: Korea National Oil Corporation & Korea Customs Service


36/71

36 March 2010

12. Real estate market

12.1 Housing market

In February 2010, nationwide apartment sales prices increased at a faster pace of 0.4

percent from 0.1 percent a month earlier.

In the Seoul metropolitan area (up 0.1%), the increase in apartment sales prices acceleratedmonth-on-month in Seoul (up 0.3%) including Gangnam (up 0.4% ). On the other hand,prices relatively stabilized in Gyeonggi province (up 0.0%) and Incheon (down 0.1%).

Meanwhile, apartment sales prices in areas excluding the Seoul metropolitan areacontinued to increase led by some metropolitan cities such as Busan (up 1.3%) and Daejeon(up 1.3%) without enough apartments put up for sale.

The increase in rental prices has been speeded up significantly to 0.9 percent from theprevious months 0.4 percent. In Seoul (up 1.0%), the acceleration was led by Gangnam (up

1.4%), Seocho (up 2.2%), Songpa (up 2.1% ) and Gwangjin (up 3.1%) with rising demand ingood school districts and from newlyweds.

Apartment sales transactions in January 2010 plunged from 81,961 a month earlier to post61,974. The transactions were up 26.3 percent from a year earlier and down 13.8 percentcompared with the monthly average recorded in the same month for the past 3 years.

Source: Korea Land Corporation

(Monthly average, thousand)Apartment sales transactions

Nationwide

2007 2008 2009 2010

Annual

84

Jan

87

Annual

74

Jan

80

Annual

77

Jan

49

Feb

60

Mar

79

Apr

76

May

72

Jun

81

Jul

91

Aug

81

Sep

90

Oct

87

Nov

82

Dec

82

Jan

62

(Percentage change from previous period)Nationwide apartment sales prices

Nationwide

Seoul

Gangnam2

Gangbuk3

Seoul metropolitan area

5 metropolitan cities

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

2006 2007 2008 2009 2010

Annual

13.8

24.1

27.6

19.0

24.6

2.1

Annual

2.1

3.6

0.5

8.3

4.0

-0.6

Annual

2.3

3.2

-1.9

9.4

2.9

1.0

Annual

1.6

2.6

3.9

0.9

0.7

2.8

Q1

-1.2

-1.3

-1.1

-1.7

-1.8

-0.7

Q2

0.4

1.0

1.7

0.2

0.5

0.3

Q3

1.5

2.6

3.1

2.0

1.8

1.3

Q4

0.9

0.3

0.2

0.4

0.2

1.9

Dec

0.2

0.0

0.0

0.0

-0.1

0.5

Jan

0.1

0.1

0.2

0.0

0.0

0.4

Feb

0.4

0.3

0.4

0.1

0.1

0.8

Feb11

0.1

0.1

0.1

0.0

0.0

0.2

Feb81

0.1

0.1

0.1

0.0

0.0

0.2

Feb151

0.0

0.0

0.0

0.0

0.0

0.1

Feb221

0.1

0.0

0.0

0.0

0.0

0.2

(Percentage change from previous period)Nationwide apartment rental prices

Nationwide

Seoul

Gangnam2

Gangbuk3

Seoul metropolitan area

5 metropolitan cities

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

2006 2007 2008 2009 2010

Annual

7.6

11.5

11.3

11.8

11.7

3.0

Annual

1.9

2.2

0.5

4.6

2.1

1.1

Annual

0.8

-1.8

-3.6

0.5

-0.4

1.6

Annual

4.5

8.1

10.4

5.4

5.6

3.9

Q1

-1.3

-0.8

-0.1

-1.6

-1.8

-0.9

Q2

0.9

1.8

2.4

1.0

1.4

0.4

Q3

2.8

4.7

5.1

4.2

4.1

1.9

Q4

2.0

2.3

2.7

1.9

1.8

2.6

Dec

0.3

0.4

0.5

0.2

0.1

0.7

Jan

0.4

0.6

0.9

0.1

0.3

0.7

Feb

0.9

1.0

1.2

0.7

0.7

1.4

Feb11

0.2

0.2

0.3

0.2

0.2

0.4

Feb81

0.2

0.2

0.2

0.2

0.2

0.4

Feb151

0.1

0.1

0.1

0.1

0.1

0.1

Feb221

0.2

0.2

0.2

0.3

0.2

0.3


37/71


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


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38 March 2010

12.2 Land market

Continuing the moderate recovery pace since April 2009, nationwide land prices in January

2010 rose 0.25 percent, slightly decelerating from the previous months 0.34 percent. Land

prices in January were 3.0 percent lower than the pre-crisis peak reached in October 2008.

In the Seoul metropolitan area (up 0.31%), land prices in Incheon (up 0.45%) and Gyeonggi

province (up 0.35%) saw a robust increase.

Meanwhile, land price increases in areas excluding the Seoul metropolitan area slowed to

0.14 percent from 0.26 percent of the previous month.

Nationwide land transactions in January recorded 170,000 land lots, down 29.6 percent from

the previous month and up 26.9 percent from the same month of the previous year.

Nationwide land transactions decreased in terms of land lots led by Incheon (down 49.3%),

South Jeolla province (down 35.8%) and Gyeonggi province (down 33.5%).

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

0.37 (Oct 2009) 0.36 (Nov) 0.38 (Dec) 0.31 (Jan 2010)

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

0.16 (Oct 2009) 0.21 (Nov) 0.26 (Dec) 0.14 (Jan 2010)

(Percentage change from previous period)Land prices by region

Nationwide

Seoul

Gyeonggi

Incheon

2007 2008 2009 2010

Annual

3.88

5.88

4.22

4.86

Q3

0.91

1.40

1.05

1.12

Q4

1.15

1.90

1.14

1.13

Annual

-0.31

-1.00

-0.26

1.37

Q1

1.23

1.83

1.28

1.36

Q2

1.46

2.17

1.57

1.67

Q3

1.18

1.59

1.28

2.01

Q4

-4.08

-6.34

-4.28

-3.57

Annual

0.96

1.40

1.22

1.99

Q1

-1.20

-1.38

-1.62

-1.39

Q2

0.35

0.68

0.37

0.53

Q3

0.88

1.30

1.13

1.16

Q4

0.94

0.81

1.36

1.70

Annual

0.25

0.25

0.35

0.45

Jan

0.25

0.25

0.35

0.45Source: Korea Land Corporation

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

Nationwide

Seoul

Gyeonggi

Incheon

2007 2008 2009 2010

Annual

208

33

49

13

Annual

208

26

45

13

Annual

203

22

46

10

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

Sep

226

28

56

13

Oct

212

25

52

14

Jan

170

16

39

6

Nov

207

19

48

11

Dec

241

21

58

12

Source: Korea Land Corporation


39/71


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)


40/71

40 March 2010

13. Composite indices of business cycle indicators

The coincident composite index increased 0.9 percent month-on-month in January 2010,

while the cyclical indicator of coincident composite index was up 0.5 points from the

previous month.

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 with the exception of the number of non-farm payroll employment which

has remained flat.

The leading composite index climbed 0.3 percent from the previous month, while the 12-

month smoothed change in leading composite index slipped 0.3 percentage points month-

on-month.

The indicator of inventory cycle, the ratio of job openings to job seekers, the value of

machinery orders received and the value of capital goods imports were up.

Components of coincident composite index in Jan 2010 (m-o-m)

Value of construction completed (3.8%), domestic shipment index (1.4%), mining & manufacturing production

index (1.3%), volume of imports (1.0%), manufacturing operation ratio index (0.7%), service activity index

(0.5%), wholesale & retail sales index (0.2%), number of non-farm payroll employment (0.0%)

Components of the leading composite index in Jan 2010 (m-o-m)

Indicator of inventory cycle (3.8%p), ratio of job openings to job seekers (3.3%p), value of machinery orders

received (1.4%), volume of capital goods imports (0.1%), composite stock price index (0.0%), liquidity in the

financial institutions (-0.1%), spreads between long & short term interest rates (-0.1%p), net terms of trade

index (-0.5%), consumer expectations index (-2.0p), value of construction orders received (-2.2%)

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 2010

1. Preliminary

Jul

1.1

98.4

0.6

1.5

7.6

2.1

Aug

0.7

98.7

0.3

0.9

8.8

1.2

Sep

0.6

98.9

0.2

0.6

9.6

0.8

Oct

0.5

98.9

0.0

0.6

10.3

0.7

Nov1

0.6

99.1

0.2

1.1

11.3

1.0

Dec1

0.6

99.1

0.0

0.7

11.6

0.3

Jan1

0.9

99.6

0.5

0.3

11.3

-0.3


41/71


Coincident and leading composite indices


94.2

92.6

13-1

13-2

13-3

Cyclical indicator of coincident composite index


Leading composite index



42/71

42 March 2010

As the Lee Myung-bak administration started its third year at the end of February, the

government looked back on the achievement of the Lee administration in terms of efforts 1)

to weather the global economic crisis, 2) support the working class, 3) upgrade Koreasimage in the international community, 4) restructure the economy, and 5) enhance potential

for future economic growth.

Weathering the economic crisis

Korea is one of the three OECD economies seeing positive growth in 2009, achieving annual

growth of 0.2 percent. The financial and foreign exchange markets began to stabilize from

the second quarter of 2009, reflecting expectations of economic rebound, as anxiety over

the international financial market began to be eased: The KOSPI soared from end-2008s

1124.5 points to 1682.8 points at the end of 2009, and during the same period the

won/dollar exchange rate continued to improve from 1259.5 won to 1164.5 won. The current

account balance recorded a surplus of US$42.7 billion in 2009, backed by brisk exports.

The IMF, OECD, and Fitch Ratings positively evaluated the role of the Korean government in

facilitating riding out the economic crisis (IMF at the annual consultation meeting in

December 2009, OECD at the 2010 annual meeting in February 2010, and Fitch Ratings in

September 2009).

The Korean government pursued expansionary fiscal policies along with tax cuts in 2008 and

2009, to supplement and stimulate demand. Some of the examples of the policies are 4.9

trillion won of supplementary budget to control rising oil prices, 11.4 trillion won of

additional budget at the end of 2008 to cope with the economic crisis, and the record high

level of supplementary budget for job creation of 28.4 trillion won. The increased budget

was complemented with early budget expenditure, with 62.9 percent of the 2009 budget,

171.5 trillion won spent in the first half of 2009. Both income tax cuts to boost domestic

demand and corporate tax cuts to promote investment were implemented in line with

consumption tax reduction and investment tax deduction.

Lee Administrations Economic Achievementfor the Past Two Years

Policy Issues


43/71


The Korean government responded swiftly in the financial market: The Bank of Korea

slashed the base rate from 5.25 to 2.0 percent, while supplying liquidity of 27.9 trillion won

through RP purchases, open market operation, bank recapitalization fund, total loan

increase, bond market stabilization fund, and increased interest-on-reserves. The

government also carried out measures exclusive for SMEs to provide them liquidity and

credit, which resulted in reduced default rates of corporate bonds and corporations.

Thanks to governments foreign liquidity provision measures such as currency swap

arrangements with the US, Japan and China, foreign currency liquidity provision by the Bank

of Korea, bond issuance to secure foreign liquidity, and relaxed regulations to facilitate

inflows of foreign investment, most indices related to foreign exchange markets have

recovered to the pre-crisis level: The CDS premium, which was 104 basis points in August

2008, fell back to 103 basis points in February 2010, after it hit 699 basis points in October 2008.

The current account balance greatly improved from a US$5.78 billion deficit in 2008 to a

surplus of US$42.67 billion in 2009, backed by relatively strong exports compared to other

nations amid the global economic downturn. Korea was ranked the 9 th largest exporter in

2009, climbing from the 12th in 2008. The government increased support for export insurance

from 130 trillion won to 170 trillion won and credit guarantee for exporters from 1.5 trillion

won to 6 trillion won between 2008 and 2009 in addition to expanded budgets for R&D and

overseas marketing. The governments efforts to help enhance Korean companies

competitiveness will continue through its firm support for parts and service industries, and

green growth engines.

Supporting the working class

To help boost falling employment levels in face of the crisis, the government launched the

job sharing program. Governments job creation programs include Hope Employment

Program which provided 250,000 jobs to the vulnerable group, youth internship program

through which 99,000 college graduates were employed, and social welfare service program

for which the government financed 1.1 trillion won in 2008 and 16.4 trillion won in 2009 to

support employment of social welfare workers. In 2010 the National Strategic Meeting on

Employment, a monthly meeting presided by the president, was launched, in which mid-and

long term as well as short term measures to raise employment are discussed, laid out, andimplemented.

The government took various measures to stabilize prices directly affecting the lives of low

income class. The price stabilizing measures include oil tax reduction of 10 percent,

redemption of 3.5 trillion won for oil purchased in 2008, lowering tariff quotas and

stabilizing public utility charges, and monitoring prices of 52 necessities: lower tariff quotas

applied to 123 import items in 2009 and public utility charges up 2.4 percent in 2008 and 1.9

percent in 2009. The government will monitor and balance supply of and demand for

agriculture, livestock and fishery products to stabilize their prices, while it strictly bans price-

fixing of manufactured goods.


44/71

The ratio of welfare budget to total budget was steadily increased from 2007s 25.8 percent

to 26.2 percent in 2008 to 26.6 in 2010. To help the low income class with burden of

education and housing costs, the government adopted income contingent loans and low

interest rate student tuition loans, and planned to provide 1.5 million housing units

affordable to the low income group between 2009 and 2018. The government begansupporting those who have will to be self-reliant but with poor credit through micro-loan

programs which do not require any security for loans. The micro-loan programs will be

expanded to 2 trillion won for the next 10 years. Low income working families of 590,000

received earned income tax credit of 453.7 billion won in 2009 for the first time, which was

designed to encourage them to work.

Upgrading Koreas image in the international community

In 2009 as one of the G20 Troika, Korea played an active role in working together in the

international community to ride out the crisis through the Washington, London and Pittsburg

summits, where Korea proposed a standstill on protectionism, sharing Koreas experience of

dealing with toxic assets, and international cooperation in laying out exit strategies. Korea,

as the first emerging country to host a G20 summit, will try hard to effectively play a bridging

role between developed and developing countries, enhance cooperation among

international organizations, and actively collaborate with domestic and overseas think tanks

to reflect their expertise to the G20 Seoul summit in 2010.

Korea made one step forward to become a more reliable donor country by doubling the size

of Official Development Aid (ODA) from US$450 million in 2006 to US$900 million in 2009,

and expanding Knowledge Sharing Program (KSP), through which Korea shares its economic

development experience with other developing countries, from eight countries in 2008 to 11

countries in 2009 with increasing financial support from 2.5 billion won to 5 billion won.

Korea joined the OECDs Development Assistance Committee (DAC) in November 2009, and

the legal basis for ODA has been established in January 2010.

On the trade front, five FTAs (FTAs with Chile, the EFTA, Singapore, the ASEAN, and India) are

in force, two (FTAs with the US and the EU) signed, seven (FTAs with Canada, the GCC,Mexico, Peru, Australia, New Zealand, Columbia) under negotiation, and eight under study.

To raise Koreas birth rate, the government announced measures covering five key areas of

easing bringing-up burden, supporting households with more than two children, creating

family-friendly working environment, supporting single parent and adopting parents, and

pursuing more open immigration policies. Action plans for 2011 through 2015 will follow, and

be reflected in budgeting.

44 March 2010


45/71

Restructuring the economy

The government founded a financial basis for corporate restructuring by launching the Bank

Recapitalization Fund of 20 trillion won and Corporate Restructuring Fund of 40 trillion won.

To promote corporate restructuring, the government introduced corporate tax reduction inApril 2009, which applies to a company or its major shareholders selling assets to repay

corporate debt. The revised capital market law was passed in the plenary session of the

National Assembly in February 2010, which allows Private Equity Fund to invest in

corporation under restructuring.

Household debt, in particular mortgage loans, has been on the rise. However, the debt is

relatively sound thanks to the governments early response to increasing mortgage loans by

tightening the loan to value (LTV) ratio and debt to income (DTI) ratio.

In dealing with cacophonous labor-management relations, the government stuck to the

principle that it does not tolerate any illegal walkouts. Revised regulations banning

companies from paying full-time union workers and allowing multiple unions in one

workplace were passed, which will be enforced from July 2010 and July 2011, respectively.

Instead of paying by a company as full time union workers, union members will be exempt

from their company duties for some time to carry out union activities. Multiple unions in one

workplace are obliged to form a single bargaining body to negotiate with a company. The

number of labor-management disputes hit the lowest in 2008 at 130 cases and increased to

175 in 2009, which, although increased, is still a low level compared with the previous years.

Governments efforts to scrap unnecessary business regulations were paid off as the World

Banks report Doing Business 2010 ranked Korea 19th out of 183 countries in the business

friendliness scale, up 4 notches from the previous year. Korea lifted limitations on giant

corporations investment in other companies, by allowed non-financial companies to hold

bank shares up to nine percent, eased regulations on metropolitan area development and

military facilities protection zone development, and took market friendly measures in the

service sector.

Nurturing future growth potential

The government designated 17 future growth engines in three areas: 1) green technologies

to generate and effectively use energy, 2) high-tech convergence industries such as IT and

communications, new materials and nano-technology, and medical devices and bio-

technology, and 3) value added services such as health care, education, content & software,

and tourism. The government increased support for those industries not only through R&D

budgets, tax incentives and deregulation but also by certifying new technologies to

encourage private investment in the promising technologies.



46/71

46 March 2010

Korea hosts the G-20 Deputy Finance Ministers and Deputy Governorsmeeting

The G-20 Deputy Finance Ministers and Deputy Central Bank Governors Meeting was held

at the Songdo, Incheon from February 27 to 28, marking the first G-20 meeting that Korea

chaired.

Some 150 participants included delegations from G-20 member nations and international

organizations such as the IMF, the World Bank and the OECD. The co-chairs were Shin Jae-

Yoon, the Deputy Minister for International Affairs of the Ministry of Strategy and Finance,

and Rhee Gwang-Ju, Deputy Governor of the Bank of Korea.

The focus of the meeting was to analyze the current situation of the global economy and

continue the follow-up of past G-20 agendas. On February 27, participants focused

discussions on framework for strong, sustainable and balanced growth, global financial

safety nets, and international financial institutions reform. On February 28, discussions

were centered on improving financial regulations, addressing problems of energy subsidies

and financial inclusion, and financing for the fight against climate change.

EconomicNews Briefing


47/71


About 100 of the global business leaders will gather in Seoul to attend the Seoul G-20

Business Summit from November 10 to 11, 2010. The summit will cover four topics on the

agenda: trade and investment, finance, green growth, and corporate social responsibility. It

will be the first time for the worlds top business leaders to get together on the sidelines of a

G-20 Summit, seeking economic cooperation between public and private sectors.

Amendments to the Financial Investment Services and Capital MarketsAct (FSCMA) passed at the National Assembly

Amendments to the Financial Investment Services and Capital Markets Act (FSCMA) were

passed at a general meeting of the National Assembly on February 18, 2010. The revisions

were made based on six proposals submitted by legislators to address various issues raised

since FSCMA came into effect in February 2009.

The amendments are expected to take effect in June 2010, three months after a public

announcement. In regard with commercial papers (CPs), however, the new rule will be

enforced immediately after public hearings.

With the intent to utilize the capital markets and gather private funds to revitalize corporate

restructuring, a special exemption law will be enacted and enforced for three years on asset

management of funds specially purposed for enhancing corporate financial structure. Under

the revised law, private equity funds (PEFs) for corporate financial restructuring are able to

invest in a company without management participation, but are to invest more than 50

percent of their assets into corporate restructuring related assets. In regard to Mutual Funds

for corporate financial restructuring, the 10 percent rule, which limits investments in a single

company to a maximum of 10 percent of the funds assets, is alleviated to supply sufficient

liquidity to the SMEs. The funds are enabled to invest a maximum of 50 percent of its assets

in newly issued stocks of SMEs and mid-size corporations.

A. Introducing PEFs and Mutual Fund for corporate financial restructuring

(temporarily enforced for 3 years)Facilitating corporate funding and corporate

restructuring through capital markets

Improving the quality of financial services

through the extended scope of financial

investment businesses, as well as enhancing

public trust in financial investment companies

Providing better protections for financial

investors and consumers

B. Allowing companies to issue CPs without issuing electronic notes

C. Strengthening requirements for financial investment companies to add

new business a

economic bulletin (vol.32 no.3)

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