Professional Documents
Culture Documents
10
Republic of Korea
Economic Bulletin
Policy Issues
2011 Budget plan 42
Statistical Appendices 53
The Green Book
Current Economic Trends
Overview
The Korean economy posted a steady recovery although temporary factors such as the
summer vacation and bad weather negatively affected real economic indicators.
Mining and manufacturing production in August fell 1.0 percent month-on-month due to the
summer vacation and production facilities under repair, while rising 17.1 percent year-on-
year. Service output lost 0.2 percent month-on-month affected by declining professional,
scientific & technical services, while gaining 4.2 percent year-on-year.
Consumer goods sales, despite a year-on-year increase of 9.3 percent, dropped 0.7 percent
month-on-month in August, as bad weather conditions adversely influenced non-durable
and semi-durable goods sales.
Exports in September, led by semiconductors and petroleum products, rose 17.2 percent
year-on-year. Imports went up 16.7 percent from a year earlier, as those of raw materials and
capital goods increased.
The total number of workers hired in August gained 386,000 year-on-year, led by
manufacturing and construction industries. The employment rate (seasonally adjusted)
posted 59.0 percent, adding 0.2 percentage points year-on-year, while the unemployment
rate (seasonally adjusted) registered 3.4 percent, shedding 0.3 percentage points.
The consumer price in September posted a year-on-year increase of 3.6 percent, as the
prices of agricultural, livestock & fishery products soared affected by unusual weather
conditions and heavy rainfall. However, core consumer prices, which exclude petroleum and
agricultural products, continued to show a modest increase of 1.9 percent.
In September, stock prices rose and foreign exchange rates fell, as worries over a possibile
global economic slowdown eased and expectations of the Fed’s quantitative easing
measures led to dollar depreciation.
Housing prices in September continued to fall in the metropolitan area, while rental prices
increased due to the autumn moving season and a wait-and-see attitude held by potential
home buyers.
To sum up, although the global economy continues a steady recovery, external uncertainties
still exist as major economies may slow down, foreign exchange rates become increasingly
volatile, and European fiscal problems linger.
The Korean government will continue macroeconomic policies which facilitate sustainable
growth and employment, while keeping away inflation expectations amid the price rise
caused by recent bad weather conditions. On the other hand, the government will renew its
efforts to examine risk factors of each industry and reform the economy so that external
changes may influence the economy to a minimum, while keeping trying to create more jobs
for vulnerable groups, encourage cooperation between large conglomerates and small- and
medium-sized enterprises, both of which are expected to improve the real economy.
Economic Bulletin 3
1-1 US GDP (q-o-q, annualized rate)
Source: US Department of Commerce
Economic Bulletin 5
1-4 China’s GDP and fixed asset investment
Source: National Bureau of Statistics of China
Economic Bulletin 7
2. Private consumption
Private consumption (preliminary GDP) increased 0.8 percent quarter-on-quarter and 3.7
percent year-on-year in the second quarter of 2010.
Consumer goods sales in August, despite a rise in durable goods sales, dropped 0.7 percent
month-on-month, as the sales of semi-durable and non-durable goods decreased.
On a month-on-month basis, durable goods sales rose 3.1 percent led by automobile sales
which registered a 11.5 percent increase, while semi-durable and non-durable goods sales
fell 2.2 percent and 2.3 percent, respectively.
On a year-on-year basis, the index increased 9.3 percent, as the sales of durable goods such
as automobiles and home electronics, semi-durable goods such as clothing, and non-
durable goods such as food & beverages all improved.
8 October 2010
2-1 Private consumption
Source: The Bank of Korea (national accounts)
Economic Bulletin 9
2-4 Department store and discount store sales (current value)
Source: Ministry of Knowledge Economy (monthly retail sales)
Economic Bulletin 11
3. Facility investment
Facility investment (preliminary GDP) in the second quarter of 2010 posted a quarter-on-
quarter increase of 9.1 percent and a year-on-year gain of 30.2 percent.
Facility investment in August rose 6.2 percent month-on-month or 39.8 percent year-on-year
on the back of strong machinery investments, in particular those for semiconductor
manufacturing.
Facility investment in September is projected to be affected by a high base effect from the
previous month’s large increase despite brisk machinery imports and solid investor
confidence.
2010
Apr May Jun Jul Aug Sep
Business survey indices (base=100) for
104 104 107 106 106 106
manufacturing facility investment projections
Source: The Bank of Korea
12 October 2010
3-1 Facility investment by type
Source: The Bank of Korea (national accounts)
Economic Bulletin 13
4. Construction investment
Construction investment (preliminary GDP) in the second quarter of 2010 declined 3.6
percent quarter-on-quarter and 2.9 percent year-on-year.
(Percentage change from same period in previous year)
2008 2009 20101
Annual Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 Q1 Q2
Construction investment 2
-2.8 -0.5 0.4 -7.7 4.4 2.8 5.1 4.4 5.0 2.3 -2.9
(Seasonally adjusted)3 - -0.4 0.7 -3.3 - 5.9 1.8 -0.7 -0.1 1.3 -3.6
- Building construction -4.6 -0.8 0.2 -14.8 -1.8 -9.6 -2.4 1.2 2.5 1.7 -6.3
- Civil engineering works -0.2 -0.2 0.8 1.6 13.3 26.1 15.7 9.7 7.5 3.1 1.1
1. Preliminary
2. National accounts
3. Percentage change from previous period
Source: The Bank of Korea
Construction completed (constant value) in August, while rising 3.0 percent year-on-year,
fell 5.5 percent month-on-month, as building construction and civil engineering works
declined due to the sluggish housing market and reduced fiscal spending.
2010
Apr May Jun Jul Aug Sep
Business survey indices (base=100) for
85.5 74.1 69.6 58.4 55.9 71.5
Construction projections
Source: The Construction and Economy Research Institute of Korea
14 October 2010
4-1 Construction investment
Source: The Bank of Korea (national accounts)
Economic Bulletin 15
5-1 Exports (customs clearance basis)
Source: Korea Customs Service & Ministry of Knowledge Economy (export and import trend)
Economic Bulletin 17
6-1 Industrial production
Source: Statistics Korea (industrial activity trend)
6-3 Inventory
Source: Statistics Korea (industrial activity trend)
Economic Bulletin 19
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21
8. Employment
The number of workers on payroll in August increased by 386,000 from a year earlier, while
the employment rate (seasonally adjusted) rose by 0.2 percentage points year-on-year to
59.0 percent.
By status of workers, despite an accelerated decrease in daily workers (down 115,000), wage
workers (up 569,000) continued to expand growth as the number of regular workers (up
679,000) and temporary workers (up 5,000) increased. Non-wage workers (down 183,000)
including self-employed workers (down 133,000) continued to decline.
22 October 2010
8-1 Number of employed and employment growth
Source: Statistics Korea (employment trend)
Economic Bulletin 23
The number of unemployed persons in August decreased by 74,000 year-on-year to record
831,000 and the unemployment rate (seasonally adjusted) stood at 3.4 percent, down 0.3
percentage points year-on-year.
By gender, male unemployment (down 83,000) accelerated the decrease while female
unemployment (up 9,000) increased.
By age, the unemployment rate decreased in all age brackets except seniors aged 60 or
more (up 10,000). The unemployment for youths aged 15 to 29 dropped 1.2 percentage
points, recording 7.0 percent.
The economically inactive population in August was up 172,000 from a year earlier to post
15,820,000. Meanwhile, the labor force participation rate (seasonally adjusted) was up 0.1
percentage point year-on-year to 61.1 percent.
The number of workers quitting jobs due to rest, time-off, and leisure (up 18,000),
housework (up 204,000) and education (up 83,000) increased, while those who quit jobs
due to childcare (down 148,000) decreased.
24 October 2010
8-4 Employment rate
Source: Statistics Korea (employment trend)
Economic Bulletin 25
9. Financial market
9.1 Stock market
The Korean stock market in September surged amid easing concerns over global economic
slowdown. KOSPI showed a strong upward momentum as economic indicators in major
economies such as the US and China improved and the National Bureau of Economic
Research (NBER) declared the end of the recession, which renewed expectations of
economic recovery.
KOSPI broke the 1,870-point as investor sentiment improved with strong earnings
expectations for Korean companies and successful issuances of government bonds by
Europe’s debt-ridden nations including Portugal.
Foreign investors shifted to a huge net-buying position, purchasing to 4.3 trillion won, as
international money market’s appetite for risk grew and investors noticed that KOSPI
remains undervalued.
The won/yen exchange rate was down 55.7 won month-on-month as the won appreciated
relatively significantly backed by Korea’s solid economic fundamentals amid the weak dollar.
(End-period)
2006 2007 2008 2009 2010
Dec Dec Dec Dec Aug Sep Change1
Won/Dollar 929.8 936.1 1,259.5 1,164.5 1,198.1 1,140.2 2.1
Won/100Yen 783.4 828.6 1,396.8 1,264.5 1,423.8 1,368.1 -7.6
1. Appreciation from the end of the previous year (%); the exchange rate is based on the closing price at 3:00 p.m., local time.
26 October 2010
9-1 Stock prices
Economic Bulletin 27
9.3 Bond market
Treasury bond yields plummeted in September as the Bank of Korea (BOK) was expected to
keep its policy rate unchanged until the end of this year. Despite improved domestic and
overseas stock market conditions, Treasury bond yields continued to decrease due to the
BOK’s unexpected rate freeze, mounting expectations over the Federal Reserve’s additional
liquidity measures and the strong won.
(End-period)
2006 2007 2008 2009 2010
Dec Dec Dec Dec Jul Aug Sep Change1
Call rate (1 day) 4.60 5.02 3.02 2.01 2.28 2.28 2.27 -1
CD (91 days) 4.86 5.82 3.93 2.88 2.63 2.66 2.66 0
Treasury bonds (3 yrs) 4.92 5.74 3.41 4.44 3.80 3.55 3.32 -23
Corporate bonds (3 yrs) 5.29 6.77 7.72 5.56 4.75 4.53 4.26 -27
Treasury bonds (5 yrs) 5.00 5.78 3.77 4.98 4.38 4.00 3.71 -29
1. Basis point changes in May 2010 from the previous month
28 October 2010
9-4 Interest rates
Source: The Bank of Korea
Economic Bulletin 29
10-1 Current account balance
Source: The Bank of Korea (balance of payments trend)
Economic Bulletin 31
11-1 Prices
Source: Statistics Korea (consumer prices, core inflation) & The Bank of Korea (producer prices)
Economic Bulletin 33
11.2 International oil and commodity prices
In September, international oil prices inched up month-on-month while domestic oil product
prices edged down from the previous month.
International oil prices (Dubai crude) showed a mixed trend until mid September before
edging up toward the end of the month. Governments’ aggressive policy response such as
maintaining the low interest rate policy eased concerns that major economies such as the
US would fall into another economic recession, pushing up international oil prices.
(US$/barrel, period average)
2007 2008 2009 2010
Annual Annual Annual Mar Apr May Jun Jul Aug Sep
Dubai crude 68.4 94.3 61.9 77.3 83.6 76.8 74.1 72.6 74.2 75.2
Brent crude 72.8 97.5 61.7 79.0 84.8 75.2 74.9 75.7 77.2 77.9
WTI crude 72.3 99.9 61.9 81.3 84.5 73.7 75.3 76.3 76.6 75.3
Source: KOREAPDS
Although international oil prices increased slightly, domestic prices of oil products continued
to decrease month-on-month as the won’s value against the dollar stabilized.
(Won/liter, period average)
2007 2008 2009 2010
Annual Annual Annual Mar Apr May Jun Jul Aug Sep
Gasoline prices 1,526 1,692 1,601 1,691 1,725 1,732 1,715 1,722 1,716 1,700
Diesel prices 1,273 1,614 1,397 1,469 1,507 1,522 1,509 1,518 1,513 1,499
Source: Korea National Oil Corporation
Prices of non-ferrous metals and grain in September increased due to robust demand in
emerging markets such as China and expected decreases in major grain production hit by
aggravating weather conditions.
Prices of major non-ferrous metals such as copper and nickel climbed as robust demand
continued with China, the world’s largest importer of raw materials, expanding imports of
non-ferrous metals.
International prices of grain including corn hiked due to bad weather conditions in major
grain producing countries as well as forecasts of lower US production.
34 October 2010
11-4 International oil prices
Source: Korea National Oil Corporation
Economic Bulletin 35
12. Real estate market
12.1 Housing market
In September, nationwide apartment sales prices were up 0.2 percent month-on-month.
Apartment sales prices in the Seoul metropolitan area fell for the sixth consecutive month in
September with a 0.3 percent decrease. The pace of decrease was however, slowing steadily.
Meanwhile, apartment sales prices in areas excluding the Seoul metropolitan area
continued to increase significantly led by Busan (up 1.1%), South Gyeongsang province (up
1.1%) and North Jeolla province (up 0.8%). Apartment prices in 5 metropolitan cities and
other cities advanced 0.6 percent and 0.5 percent month-on-month, respectively.
Apartment rental prices in September were up 0.7 percent from the previous month on
strong seasonal demand in autumn from newlyweds and others. In the Seoul metropolitan
area, apartment rental prices considerably accelerated the month-on-month increase (up
0.8%), reversing a stabilizing trend of recent months.
Apartment sales transactions in August declined 7.1 percent from 61,878 a month earlier to
post 57,492. The transactions were down 29.0 percent from a year earlier and 17.4 percent
compared with the monthly average of 70,000 recorded in the same month for the past 3
years.
36 October 2010
12-1 Real estate prices
Source: Kookmin Bank (national housing price trend)
Economic Bulletin 37
12-4 Land and consumer prices since 1970s
Source: Korea Land Corporation (land prices) & Statistics Korea (consumer prices)
Economic Bulletin 39
13. Composite indices of business cycle indicators
The cyclical indicator of coincident composite index decreased 0.1 point month-on-month to
post 102.1 in August.
Among the components of coincident composite index, four components such as the service
activity index and the value of construction completed went down while the other four
components such as the domestic shipment index and the wholesale & retail sales index
were up.
The year-on-year leading composite index in August increased 0.2 percentage points from
the previous month showing a fourth consecutive month upward trend of the economy but
decreased by 0.8 percentage points year-on-year due to last year’s high base effect.
Among the components of the leading composite index, five components such as the value
of construction orders and the indicator of inventory cycle declined, while the other five
components such as the ratio of job openings to job seekers and the composite stock price
index climbed.
2010
Feb Mar Apr May Jun1 Jul1 Aug1
Coincident composite index (m-o-m, %) 1.2 0.9 0.9 0.7 0.8 0.9 0.3
Cyclical indicator of coincident composite index 100.0 100.6 101.1 101.4 101.7 102.2 102.1
(m-o-m, p) 0.7 0.6 0.5 0.3 0.3 0.5 -0.1
Leading composite index (m-o-m, %) -0.2 0.2 -0.2 0.6 0.3 0.9 0.2
12 month smoothed change
in leading composite index (%) 10.3 9.7 8.6 7.9 7.1 6.7 5.9
40 October 2010
13-1 Cyclical indicator of coincident composite index
Source: Statistics Korea
Economic Bulletin 41
Policy Issues
2011 Budget Plan
Background
During the past two years, the Korean government has put the first priority on riding out the
economic crisis. The administration actively responded to the crisis, as it laid out 40.6 trillion
won in fiscal spending through supplementary budgets and put 26.1 trillion won in tax
reduction, the total of which amounted to 66.7 trillion won or 6.5 percent of GDP, between
2008 and 2010. Helped by the government’s swift response, Korea has seen its economy
recover faster than any other OECD member countries. Against this backdrop, the Korean
government unveiled the 2011 budget plan focusing on 1) expediting the trickle-down of the
economic recovery to the real economy, and 2) improving fiscal consolidation impaired while
the country was trying to overcome the crisis.
The 2011 budget will prioritize 1) supporting working class people through welfare services
designed to the need of individuals in education, daycare, housing and medical services, 2)
nurturing future growth engines such as green technologies, convergence industries and
other breakthrough technologies by providing more systematic support in developing core
technologies, growing professionals, creating new markets, and funding startups, and 3)
improving the fiscal balance so that it will reach a balance between 2013 and 2014 and the
national debt will be reduced to the lower 30 percent range to GDP by 2014.
42 October 2010
The budget plan
The total revenue in 2011 including budgets and funds will be 314.6 billion won, an 8.2
percent increase from 2010, with the tax burden remaining at the same level as 2010 of 19.3
percent of GDP.
The total expenditure in 2011 will be 309.6 trillion won, a 5.7 percent increase from 2010.
The expenditure increase is 2.5 percentage points lower than the revenue increase, which is
expected to contribute to improving fiscal health.
The fiscal balance is expected to improve 0.7 percentage points from -2.7 percent to GDP in
2010 to -2.0 percent in 2011. The fiscal deficit will start to be reduced from 2011, and a fiscal
balance is expected to be reached by 2013 or 2014. The national debt will be decreased by 0.9
percentage points to 35.2 percent to GDP in 2011 from 2010’s 36.1 percent. Less amount of
national bonds to supplement the general account will be issued in 2011, as 22.0 trillion won
of the bonds are planned to be on the market in 2011 compared with 2010’s 29.3 trillion won.
Economic Bulletin 43
<Major budget allocation> (trillion won, %)
Sector 2010 Budget (A) 2011 Budget plan (B) Difference (B-A) Change (B/A, %)
R&D 13.7 14.9 1.2 8.6
Industries, SMEs, energy 15.1 15.2 0.06 0.4
- Excluding a budget for reserving oil 14.4 15.2 0.8 5.2
SOC 25.1 24.3 -0.8 -3.2
- Four river restoration project 3.2 3.3 0.1 1.9
Agriculture, fishery, food 17.3 17.7 0.4 2.3
Health, welfare, employment 81.2 86.3 5.1 6.2
Education 38.3 41.3 3.0 8.0
- Grants for local education 32.3 35.3 3.0 9.3
Culture, sports, tourism 3.9 4.1 0.2 5.0
Environment 5.4 5.7 0.3 5.0
Defense (general account) 29.6 31.3 1.7 5.8
Foreign affairs, reunification 3.3 3.7 0.4 9.0
Public order, public safety 12.9 13.6 0.7 5.3
General public administration 48.7 53.2 4.5 9.3
- Tax grants to local governments 27.4 30.2 2.8 10.3
Total expenditure 292.8 309.6 16.8 5.7
Single income households with monthly income of 4.5 million won or less and double
income households with monthly income of 6.0 million won or less, in case both of which are
more than four member families, will be able to send their children to daycare centers free of
charge. Up to 0.2 million won of childcare grants will be available to household with children
under 36 months old who do not go to daycare centers. Would-be mothers will be paid 1.0
million won during their maternity leave and reemployment centers for mothers will be
revitalized.
The number of retired police officials and senior volunteer groups engaged in junior safety
patrol in schools and school vicinities will be expanded from 1,740 persons to 2,270 persons
and from 30 groups to 100 groups, respectively. Counseling services for victimized children
will be expanded greatly with increased government support from 58.7 billion won to 91.7
billion won.
Tuitions and admission fees for vocational high schools will be entirely provided by the
government, for which 315.9 trillion won will be set aside. College scholarship for students
from low-income families will also be expanded 100 billion won in 2011 from 2010’s 181.7
billion won to 331.3 billion won.
44 October 2010
The 2011 budget will spend 400 billion won on securing housing for low-income families, a
100 billion won increase from 2010’s 300 billion won. 11,000 old houses owned by those
eligible for government’s basic livelihood support will be improved, an increase of 3,000
houses, along with home improvement to public rental housing. Homeless people who
contracted tuberculosis will be under special care, and the emergency medical service
system will be reformed so that the time taken to get the service can be reduced.
Those with government’s long-term care for the severely disabled will be provided with
expanded services such as visiting nurses and carers in addition to aid for housework and
transportation. More than 10,000 customized jobs for disabled people will be provided in
2011, and companies employing disabled people will have increased support from 5.4 billion
won to 6.5 billion a year in case of the ordinary disabled and from 7.2 million to 8.6 million
for the severely disabled. Visiting childcare service sent to families with disabled children
will be increased about four times from 688 families to 2,500 families. The number of those
eligible for disabled medical support will be raised along with the amount of the support.
Seniors will be provided with 200,000 customized jobs, while having expanded basic
livelihood pensions, Senior Long-term Care Insurance, and visiting carer services.
Temporary educational and medical supports will be offered for two years to those who are
not eligible any more for educational and medical supports due to an income increase, from
which 8,100 persons will benefit. All multicultural families, regardless of their income, will be
provided with childcare support, which will amount to 58 billion won, along with language
learning support of 5.6 billion won. To help settle marriage immigrants in Korea, the
government will set aside 25.7 billion won for early settlement counseling, and 1.4 billion
won for employment counseling.
Economic Bulletin 45
2. Budgets for developing future growth engines
New technologies with great potential markets such as those in robots, biomedicine and
green cars, and industries with large job-creating potential and high added value such as
content and health care industries will have stronger support in 2011. Technologies having
spreading effects on other industries such as those in automobiles, shipbuilding,
convergence, IT, software and energy will have solid support along with the development of
World Premier Materials including secondary battery, LED, steel plates used in automobiles
and vessels, and display panels. One trillion won will be set aside for basic scientific
researches, while space and aeronautics have expanded support. Next generation exports,
in particular plant exports, will also have unwavering support.
Budgets for the four river restoration project will be 3.3 trillion won, an increase of 60 billion
won compared with 2010.
At the advent of the Green House Gas and Energy Target Management System, the
government will invest 13.4 billion won in building up a national statistics system to help
smoothly adopt the target management system. Expanded loans of 600 billion won will be
available to Energy Service Companies (ESCOs), which provide energy-saving solutions. New
renewable energy industries such as solar and nuclear energy, and wind power industries
will be nurtured as new growth engines. More budgets set aside for railroad construction
and maintenance in 2011 than 2010, as trains are cleaner means of transportation than cars.
2.2 trillion won will be put to secure water and upgrade water quality.
Official Development Assistance (ODA) will be increased from 1.3 trillion won in 2010 to 1.6
trillion won in 2011. Seven countries will be eligible for customized consultation on Korea’s
economic development experience.
R&D investment into agricultural and fishery industries will be largely increased, especially
in the fields to relate high technologies such as information technolgy (IT) and biotechnology
(BT) to the industries.
46 October 2010
<Budgets for developing future growth engines> (billion won, %)
2010 2011 Difference Change (%)
New growth engines 2,855.9 3,355.4 499.5 17.5
Next generation exports 733.8 771.1 37.3 5.1
Four river restoration 3,220.0 3,280.0 60.0 1.9
Response to the climate change 4,348.7 5,777.2 1,428.5 32.8
Foreign affairs 1,971.4 2,400.9 429.5 21.8
Agricultural and fishery industries 2,372.5 2,545.3 172.8 7.3
SMEs 3,781.3 3,998.9 217.6 5.8
Employment 1,507.8 1,589.3 81.5 5.4
Total 20,791.4 23,718.1 2,926.7 14.1
Transfer of financial resources from the central government to local governments such as tax
grants and education grants will be increased by 5.9 trillion won, making the total of 95.5
trillion won in 2011. Investments into local industries and corporate investment into
provinces will have larger incentives.
Major defense budgets will reflect the North’s provocation near the Northern Limit Line (NLL)
and its unparallel threat, allocating more resources to reconnaissance and early warning.
Each police station-based crime reporting centers will be integrated under the local office,
for the police to move out faster in case of emergency, while a relief fund for crime victims is
to be set up. Budgets for flood prevention such as river improvement and rainwater
management will be increased, along with larger budget allocation in weather forecasting
equipment.
The fiscal deficit is expected to decrease 0.7 percentage points in 2011 from 2010’s 2.7
percent to 2.0 percent. The national debt to GDP in 2011 will be improved 0.9 percentage
points to 35.2 percent.
Mid- and long term fiscal management plan will be set up in preparation for possible future
exhaustion of 11 funds including National Pension Fund and Public Employees’ Pension
Fund. Budget cuts for projects with government subsidies will go on in 2011, with thorough
inspections taken place every three years. Similar or overlapping employment programs will
be integrated: 2010’s 202 programs by 23 ministries combined into 151 programs by 22
ministries in 2011. Welfare grant recipients will continue to be checked in terms of eligibility
on the basis of the integrated welfare grant management system which monitors changes in
recipients’ income and property as well as their welfare grant status.
Economic Bulletin 47
Economic
News Briefing
Korea and the European Union (EU) officially signed a free trade agreement (FTA) on October
6. The two sides held the official signing ceremony at the European Council headquarters in
Brussels. Korean President Lee Myung-bak, EU President Herman Van Rompuy, and
European Commission President Jose′Manuel Barroso attended the ceremony.
The Korea-EU FTA marks the first free trade pact the EU has settled with an East Asian
country. The agreement will come into provisional effect in July next year. The pact
eliminates or phases out all duties on Korean exports to the EU, and 97.0 percent of the
duties on EU exports to Korea over the next five years. Tariffs on 81.7 percent of Korean
goods and 94.0 percent of EU products will be immediately abolished after the deal takes
effect. With respect to the service sector, Korea is to open 115 industries while Europe will
allow 139 industries.
Once the FTA enters into force, Korea’s real GDP is expected to grow 5.6 percent, and its
exports in manufacturing sectors, including automobiles, electronics, and textiles, are
48 October 2010
predicted to increase considerably. At a joint press conference following the fifth Korea-EU
summit, President Lee said the Korea-EU FTA will bring huge economic benefits to both
Korea and the EU. Lee added that the trade pact will boost economic cooperation and
promote tourism as well as exchanges in education, culture, human resources, sports and
other fields.
On October 6, the International Monetary Fund (IMF) assessed that the world economic
recovery is proceeding but remains fragile since it is an unbalanced recovery with sluggish
advanced economies and much stronger emerging and developing countries. The
Washington-based agency projected that the world economy will grow by 4.8 percent and
4.2 percent in 2010 and 2011, respectively. In advanced economies, growth is projected at
2.7 percent in 2010 and 2.2 percent in 2011 while that in emerging economies as a whole is
forecast to reach 7.1 percent in 2010 and 6.4 percent in 2011. IMF’s growth forecast for the
Korean economy remained unchanged at 6.1 percent in 2010 and 4.5 percent in 2011.
The 2010 Korea-Africa Economic Cooperation Forum (KOAFEC) was held in Seoul on
September 16. Several African ministers, a delegation from the African Development Bank
(AfDB), business leaders and specialists attended the forum to discuss bilateral economic
partnership with Korea.
The forum aims at strengthening cooperation ties among KOAFEC partners in the pursuit of
mutual interests. Participants of the forum engaged in stimulating discussions to share
Korea’s development experience with Africa in areas such as construction and infrastructure,
IT and resource and energy cooperation.
Meanwhile, Korea’s Strategy and Finance Ministry and the AfDB signed in Seoul on
September 15, a memorandum of understanding (MOU) extending their US$250 million co-
financing agreement to 2011-2013. In addition, Korea and the AfDB signed two other MOUs
for joint consulting and promotion of trade and investment.
Economic Bulletin 49
Korea reveals mutual growth plan for large enterprises and SMEs
The plan consists of four parts: Ensuring a fair transaction, protecting the business
boundaries of SMEs, supporting self-sustainable growth, and establishing a system to
implement the above. The first part includes measures to give SMEs more leverage in
negotiating contract terms with large enterprises, prevent big businesses from taking SMEs’
technology, and keep an eye on large retailers’ unfair trade practices.
Other strategies involve restricting entry of conglomerates in certain sectors in order for
SMEs to take more chances, as well as expanding the scope of cooperation between large
enterprises and SMEs. Plans to boost competitiveness of small businesses and improve
working conditions in industrial complexes have also been suggested.
To ensure the sustainability of the plan, “Mutual Growth Committee” will be launched in
December. In addition, “Win-Win Index” will be adopted to assess the performance of each
company. Those rated high in the index will receive favor when participating in government
projects, while the low-ranking firms will be subject to penalties.
50 October 2010
KNOC seals Dana takeover
Korea National Oil Corporation (KNOC) announced on September 24 that it secured 64.26
percent of Dana Petroleum’s stock with its 1,800 pence per share offer. Dana Petroleum, a
British oil company, controls oil reserves in the North Sea and Africa. The deal is KNOC’s first
hostile takeover and the second largest purchase after its takeover of Canada’s Harvest
Energy last year. KNOC will apply for Dana’s delisting from the London Stock Exchange if it
secures more than 75 percent of the shares. It is anticipated that cancellation of listing and
admission to trading of Dana will take effect from October 28. The acquisition would help
KNOC to achieve its target of doubling the current oil production to 300,000 barrels a day
and reserves to 2 billion barrels by 2012.
Economic Bulletin 51
Statistical
Appendices
Tables & Figures
1. National accounts
2. Production, shipment and inventory
3. Production capacity and operation ratio
4. Consumer goods sales index
5. Consumer goods shipment index and consumer sentiment index
6. Machinery orders received, domestic machinery shipment,
and estimated facility investment index
7. Value of construction completed and domestic construction orders received
8. Composite indices of business cycle indicators and BSI
9. Balance of payments (I)
10. Balance of payments (II)
11. Prices
12. Employment
13. Financial indicators
14. Monetary indicators
15. Exchange rates
Economic Bulletin 53
1. National accounts
(year-on-year change, %, chained 2005 year prices)
54 October 2010
Growth rate by economic activity
Economic Bulletin 55
2. Production, shipment and inventory See graphs 6-1, 6-3, 7-1, 7-2 & 7-3
(constant prices, 2005 = 100)
Service
Production Shipment Inventory
Period Y-o-Y Y-o-Y Y-o-Y production Y-o-Y
index index index
change (%) change (%) change (%) index change (%)
56 October 2010
3. Production capacity and operation ratio See graph 6-2
Economic Bulletin 57
4. Consumer goods sales index See graphs 2-2, 2-3, 2-4 & 2-5
(constant prices, 2005 = 100)
Consumer
goods
Period Durable Semi-durable Non-durable
sales
Y-o-Y goods Y-o-Y goods Y-o-Y goods Y-o-Y
index
change (%) change (%) change (%) change (%)
58 October 2010
5. Consumer goods shipment index and consumer sentiment index
See graph 2-6
Domestic consumer
goods shipment index Consumer
Period (2005=100) Durable Non-durable sentiment index
Y-o-Y goods Y-o-Y goods Y-o-Y
change (%) change (%) change (%)
Economic Bulletin 59
6. Machinery orders received, domestic machinery shipment
and estimated facility investment index See graph 3-2
Domestic machinery orders received Domestic
Estimated
excluding ship (billion won, constant prices) machinery
facility investment
Period shipment
index
excluding ship
Total Public Private (2005=100)
Manufacturing (2005=100)
60 October 2010
7. Value of construction completed and domestic construction
orders received See graphs 4-2 & 4-3
(current prices, billion won)
Economic Bulletin 61
8. Composite indices of business cycle indicators and BSI
See graphs 13-1, 13-2 & 13-3
Cycle of
Leading Coincident
coincident
Period index Y-o-Y index BSI (results) BSI (prospects)
index
(2005=100) change (%) (2005=100)
(2005=100)
62 October 2010
9. Balance of payments (I) See graphs 5-1, 5-2, 5-3, 10-1 & 10-2
(million US$)
Economic Bulletin 63
10. Balance of payments (II) See graph 10-3
(million US$)
64 October 2010
11. Prices See graphs 11-1, 11-2 & 11-3
(2005 = 100)
Producer prices
Consumer prices Export & import prices
(2005=100)
Period
All Items Commodity Service Core All items Commodity Export Import
Economic Bulletin 65
12. Employment See graphs 8-1, 8-2 & 8-3
2008 7 24,673 23,903 3,975 18,088 3.1 16,363 9,054 5,163 2,146
8 24,380 23,617 3,899 17,872 3.1 16,104 9,107 4,970 2,027
9 24,456 23,734 3,928 17,951 3.0 16,221 9,142 5,015 2,064
10 24,582 23,847 3,945 18,005 3.0 16,314 9,138 5,034 2,142
11 24,566 23,816 3,897 18,086 3.1 16,377 9,111 5,071 2,195
12 24,032 23,245 3,888 17,935 3.3 16,189 9,068 5,082 2,040
2009 1 23,709 22,861 3,895 17,663 3.6 16,053 9,102 4,982 1,969
2 23,667 22,742 3,842 17,539 3.9 15,953 9,194 4,862 1,897
3 24,062 23,110 3,813 17,701 4.0 16,076 9,174 4,941 1,961
4 24,456 23,524 3,846 17,899 3.8 16,353 9,227 5,051 2,076
5 24,658 23,720 3,846 18,016 3.8 16,484 9,316 5,076 2,092
6 24,927 23,967 3,836 18,251 3.9 16,736 9,340 5,281 2,115
7 24,756 23,828 3,802 18,210 3.7 16,589 9,383 5,255 1,952
8 24,525 23,620 3,761 18,048 3.7 16,479 9,472 5,117 1,890
9 24,630 23,805 3,810 18,155 3.4 16,687 9,606 5,151 1,931
10 24,655 23,856 3,858 18,130 3.2 16,690 9,628 5,170 1,892
11 24,625 23,806 3,855 18,267 3.3 16,790 9,603 5,256 1,931
12 24,063 23,229 3,872 18,104 3.5 16,555 9,632 5,074 4,860
2010 1 24,082 22,865 3,924 17,796 5.0 16,297 9,712 4,860 1,725
2 24,035 22,867 3,886 17,762 4.9 16,282 9,786 4,838 1,657
3 24,382 23,377 3,924 18,047 4.1 16,617 9,926 4,976 1,714
4 24,858 23,924 3,991 18,285 3.8 16,994 10,011 5,147 1,836
5 25,099 24,306 4,036 18,499 3.2 17,255 10,078 5,223 1,953
6 25,158 24,280 4,017 18,422 3.5 17,193 10,089 5,165 1,938
7 25,232 24,301 4,040 18,489 3.7 17,228 10,107 5,215 1,905
8 24,863 24,005 4,058 18,175 3.3 17,048 10,151 5,122 1,775
Y-o-Y change (%)
2008 0.5 0.6 -1.3 1.3 - 1.5 4.5 -1.8 -2.6
2009 0.2 -0.3 -3.2 0.5 - 1.5 4.3 0.4 -7.4
66 October 2010
13. Financial indicators See graphs 9-1 & 9-4
(period average)
Economic Bulletin 67
14. Monetary indicators See graph 9-5
(period average) (billion won)
68 October 2010
Editor-in-Chief
Yoon, Yeo-Kwon (MOSF)
Editorial Board
Kim, Young-Min (MOSF)
Shim, Jae-Hak (KDI)
Lee, In-Sook (KDI)
Coordinators
Kim, Dae-Hyun (MOSF)
Cho, Hyun-Joo (KDI)
Editors
Lim, Keun-Hyuk (MOSF)
Kang, Ji-Eun (KDI)
Ministry of Labor
http://english.molab.go.kr/english
Statistics Korea
http://kostat.go.kr