Professional Documents
Culture Documents
Republic of Korea
Economic Bulletin
Policy Issues
Comprehensive measures to counter inflation 42
Statistical Appendices 51
The Green Book
Current Economic Trends
Overview
Korea’s real GDP growth returned to normal, as domestic conditions such as employment
and household income continued to improve amid brisk exports.
Consumer goods sales posted a month-on-month increase for a second month in a row in
November, backed by increasing sales of durable goods such as automobiles.
Although rising raw material prices pushed up imports in terms of value in December,
exports rose at a faster pace compared with the previous month, leading to an expansion in
trade surplus.
The consumer price in December climbed at a faster pace month-on-month from 3.3 percent
to 3.5 percent affected by rising international oil prices. Despite stable core consumer prices,
which went up 2.0 percent, basic necessities prices accelerated an increase from 3.6 percent
to 3.9 percent spurred by surging vegetable and oil product prices.
In December stock prices rose and foreign exchange rates fell, despite looming North Korean
risks and continuing worries over the European sovereign debt crisis, as expectations of
global economic recovery grew.
Housing prices turned to an increase in the Seoul metropolitan area in December for the first
time in eight months, while rental prices continued to rise, however at a slightly slower pace
compared with the previous month.
To sum up, although the global economy has made a steady recovery, there are still
uncertainties, as the possibility of the European fiscal crisis and danger from North Korea
linger, and inflationary pressure in emerging economies including China rises in line with
volatile international commodity prices and global liquidity excess.
The Korean government will go on with macroeconomic policies which facilitate sustainable
growth, while renewing efforts to restructure the economy and monitor the risk factors. On
the other hand, the government will be fully prepared for commodity and necessity price
increases so that they will not lead to inflationary expectations.
Economic Bulletin 3
1. Global economy
The global economy is expected to post steady recovery, as major economies as well as
emerging countries including China continued an upward track. However, there are growing
uncertainties, as international oil prices has been on the rise and worries over China’s
inflation have increased amid persisting European debt concerns.
US
US real GDP in the third quarter of 2010 has been revised up to 2.6 percent (annualized q-o-
q), with signs of recovering industrial production detected.
In November, while retail sales slowed down an increase, up 0.8 percent month-on-month,
industrial production rebounded 0.4 percent, and the ISM manufacturing index rose.
In November, both new and existing home sales shifted to an increase month-on-month by
5.5 percent and 5.6 percent, respectively.
The Federal Open Market Committee announced on December 12, 2010 that it would carry
out QE2 of US$ 600 billion bond buying as planned, as it confirmed that the economic
recovery, although steady, was not strong enough to lower the unemployment rate.
4 January 2011
1-1 US GDP (q-o-q, annualized rate)
Source: US Department of Commerce
Economic Bulletin 5
China China’s economy, while both domestic demand and exports continued to rise, experienced
liquidity expansion, which led to growing worries over inflation. The Chinese government took
tightening measures such as a 25 basis point rate hike on December 25, 2010 and a reserve
requirement ratio increase of 50 basis points on December 10, in line with rising consumer and
producer prices, up 5.0 percent and 6.0 percent, respectively.
M2 growth (y-o-y, %)
18.5 (Jun 2010) 17.6 (Jul) 19.2 (Aug) 19.0 (Sep) 19.3 (Oct) 19.5 (Nov)
(Percentage change from same period in previous year)
2009 20101
Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Oct Nov
Real GDP 9.1 6.2 7.9 9.1 10.7 11.9 10.3 9.6 - -
Industrial production 11.0 5.1 9.1 12.4 18.0 19.6 17.6 13.5 13.1 13.3
Fixed asset investment (accumulated) 30.5 28.6 33.6 33.3 30.5 26.4 25.5 24.5 24.4 24.9
Retail sales 15.5 14.9 15.0 15.4 16.9 17.9 18.5 18.4 18.6 18.7
Exports -16.0 -19.7 -23.4 -20.3 0.2 28.7 40.9 32.5 22.9 34.9
Consumer prices -0.7 -0.6 -1.5 -1.3 0.7 2.2 2.9 3.5 4.4 5.1
Producer prices -5.4 -4.6 -7.2 -7.7 -2.1 5.2 6.8 4.5 5.0 6.1
1. Preliminary
Source: China National Bureau of Statistics
Japan Japan’s real GDP growth has been revised up to 1.1 percent quarter-on-quarter in the third
quarter of 2010. Although exports kept decelerating a rise, industrial production rebounded
in six months in November along with increasing retail sales, showing signs of improving
domestic demand.
(Percentage change from previous period)
2009 20101
Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Oct Nov
Real GDP -6.3 -5.4 2.7 -0.3 1.4 1.7 0.7 1.1 - -
Industrial and mining production -21.8 -20.1 6.6 5.3 5.9 7.0 1.5 -1.8 -2.0 1.0
Retail sales (y-o-y, %) -2.32 -3.9 -2.8 -1.9 -0.7 3.8 3.7 3.2 -0.2 1.3
Exports (y-o-y, %) -34.2 -47.8 -39.9 -35.5 -8.7 44.8 35.2 19.0 8.8 -
Consumer prices (y-o-y, %) -1.4 -0.1 -1.0 -2.2 -2.0 -1.2 -0.9 -0.8 0.2 0.1
1. Preliminary
Source: Japan’s Statistics Bureau and Statistics Centre
Eurozone Eurozone’s real economy continued to recover, while there were worries over a possible
European fiscal crisis in the zone’s major economies as well as in peripheral ones. The
European Council agreed to introduce a permanent crisis management mechanism on
December 16, 2010. Moody’s degraded Ireland’s sovereign rating by five notches to Baa1 on
December 20, 2010, while Fitch cut the credit ratings of Portugal and Hungary on December 23.
(Percentage change from previous period)
2009 20101
Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Oct Nov
Real GDP -4.0 -2.5 -0.1 0.4 0.2 0.4 1.0 0.4 - -
Industrial production -14.8 -9.3 -1.7 2.7 1.3 2.4 2.3 0.9 0.6 -
Retail sales -2.4 -1.1 -0.1 -0.3 0.4 0.5 0.0 0.5 0.0 -
Exports (y-o-y, %) -18.1 -21.1 -22.7 -18.7 -9.3 12.9 22.3 22.7 20.2 -
Consumer prices (y-o-y, %) 0.3 1.0 0.2 -0.4 0.4 1.1 1.5 1.7 1.9 1.9
1. Preliminary
Source: Eurostat
6 January 2011
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 1.3 percent quarter-on-quarter and 3.3
percent year-on-year in the third quarter of 2010.
Consumer goods sales increased for the second consecutive month in November, as the sales of
durable and non-durable goods shifted to a rise from the previous month, the former from a 2.2
percent drop to a 6.5 percent increase, the latter from a 0.7 percent fall to a 2.9 percent rise.
On a month-on-month basis, consumer goods sales gained 2.9 percent backed by the brisk
sales of non-durable goods, in particular automobiles, which posted a 6.5 percent increase,
while semi-durable goods sales went down 1.5 percent due to a high base effect.
On a year-on-year basis, the index rose 6.9 percent, as the sales of durable goods such as
automobiles, semi-durable goods such as clothing, and non-durable goods such as gasoline
all increased.
Sales at large discounters and supermarkets stayed sluggish, while those at department
stores and convenience stores kept strong along with brisk non-store retailing.
8 January 2011
2-1 Private consumption
Source: The Bank of Korea (national accounts)
Economic Bulletin 9
Consumer goods sales is projected to continue an upward trend considering positive
advanced estimates, increasing household income, and improving consumer sentiment.
Household income posted a steady increase while employment continued to recover.
The consumer sentiment index has been well above the base, 100, which reflects positive
attitudes of the consumers towards the economy.
Both domestic credit card spending and department store sales continued a steady rise
year-on-year, with the former rising 14.5 percent and the latter 9.7 percent.
Gasoline sales and consumer goods imports posted a slower increase in advanced estimates.
It is likely that consumer spending will grow at a limited pace given price increases in raw
materials and agricultural products, which can possibly raise necessities prices, and
spreading foot and mouth disease.
10 January 2011
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 third quarter of 2010 posted a quarter-on-quarter
increase of 5.5 percent and a year-on-year gain of 24.3 percent.
Facility investment in November, while rising 4.5 percent year-on-year, fell 0.6 percent month-
on-month, as once soaring machinery investment led by semiconductor equipment continued
to decelerate a rise.
(Percentage change from same period in previous year)
2008 2009 2010 1
Annual Annual Q4 Q1 Q2 Q3 Sep Oct Nov
Facility investment 0.8 -8.2 10.0 25.5 24.5 27.6 11.6 9.7 4.5
(Seasonally adjusted) 2
- - 12.1 1.4 6.0 7.0 -3.7 -9.7 -0.6
- Machinery 0.6 -12.8 8.7 29.3 32.2 36.8 19.2 13.3 4.1
- Transportation equipment 1.1 11.7 15.0 11.9 0.0 -0.8 -10.5 -2.6 6.4
Domestic machinery orders -13.8 -11.8 20.0 10.5 24.2 -0.7 4.5 11.4 -14.2
(Seasonally adjusted) 2
- - -9.9 -1.4 16.7 -0.8 5.9 -15.9 -3.4
- Public 5.0 61.7 -27.2 -43.7 -41.2 -72.2 -16.2 20.8 -76.5
- Private -15.5 -19.9 35.2 22.9 34.9 21.9 7.1 10.8 3.7
- Machinery imports 6.4 -16.6 7.2 48.1 51.4 40.0 24.5 33.0 21.4
Facility investment -1.7 -4.0 12.8 21.7 14.4 5.7 -2.4 7.3 4.3
adjustment pressure3
1. Preliminary
2. Percentage change from previous period
3. Production growth rate minus production capacity growth rate in the manufacturing sector (%p)
Sources: Statistics Korea, the Korea International Trade Association (machinery imports data)
Facility investment is projected to improve given rising capital goods imports and positive
investment sentiment, but the increase is expected to be limited with once soaring
investment in semiconductor equipment getting back to normal.
2010
Jul Aug Sep Oct Nov Dec
Capital goods imports (US$ billion) 1.19 1.18 1.15 1.20 1.23 1.311
Business survey indices (base=100) for
106 106 106 105 102 103
manufacturing facility investment projections
1. Preliminary
Source: The Bank of Korea
12 January 2011
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 third quarter of 2010 rose 1.3 percent
quarter-on-quarter, while falling 2.3 percent year-on-year.
(Percentage change from same period in previous year)
2008 2009 20101
Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3
Construction investment 2
-2.8 4.4 2.8 5.1 4.4 5.0 2.3 -2.9 -2.3
(Seasonally adjusted)3 - - 5.9 1.8 -0.7 -0.1 1.3 -3.6 1.3
- Building construction -4.6 -1.8 -9.6 -2.4 1.2 2.5 1.7 -6.3 -9.7
- Civil engineering works -0.2 13.3 26.1 15.7 9.7 7.5 3.1 1.1 8.5
1. Preliminary
2. National accounts
3. Percentage change from previous period
Source: The Bank of Korea
14 January 2011
4-1 Construction investment
Source: The Bank of Korea (national accounts)
Economic Bulletin 15
5. Exports and imports
Exports in December increased 23.1 percent (preliminary) year-on-year to US$44.34 billion.
Backed by continuing global economic recovery, exports continued to post a more than 20
percent rise, with average daily exports increasing month-on-month.
By export category, major items such as steel, petroleum products, automobiles, and
semiconductors posted a substantial increase.
By regional category, exports to both emerging countries such as China and developed
countries such as the US and Japan all soared, while exports to EU shifted to a rise from the
previous month’s drop.
(US$ billion)
2009 2010
Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q41 Nov Dec1
Exports 365.53 74.42 90.36 94.78 103.97 467.40 101.09 120.25 117.12 128.95 41.29 44.34
(y-o-y, %) -13.9 -25.2 -21.1 -17.6 11.7 28.6 35.8 33.1 23.6 24.0 21.5 23.1
Average daily exports 1.30 1.10 1.30 1.32 1.49 1.69 1.51 1.76 1.69 1.79 1.72 1.81
Imports 323.09 71.42 73.97 84.85 92.85 425.68 98.13 105.74 105.69 116.12 38.50 40.60
(y-o-y, %) -25.8 -32.7 -35.6 -31.0 1.4 31.8 37.4 43.0 24.6 25.1 30.8 23.3
Average daily imports 1.16 1.06 1.06 1.18 1.33 1.54 1.46 1.55 1.52 1.61 1.60 1.66
1. Preliminary
Source: Korea Customs Service
The current account surplus in December (preliminary) was US$3.74, widening at a faster
pace compared with the previous month. The annual surplus hit a record high of US$41.72.
(US$ billion)
2009 2010
Annual Q1 Q2 Q3 Q4 Annual1 Q1 Q2 Q3 Q41 Nov Dec1
Trade Balance 40.45 3.00 16.39 9.94 11.12 41.72 2.96 14.51 11.43 12.83 2.67 3.74
1. Preliminary
Source: Korea Customs Service
16 January 2011
5-1 Exports (customs clearance basis)
Source: Korea Customs Service & Ministry of Knowledge Economy (export and import trend)
Economic Bulletin 17
6. Mining and manufacturing production
Mining and manufacturing production in November rose 1.4% month-on-month and 10.4%
year-on-year as the manufacturing sector posted strong performance across the board.
By business category, most productions including those of semiconductors and parts (up
1.3%) and metal working (up 6.9%) rose month-on-month, while those of audio-visual
communications equipment (down 1.6%) and pharmaceuticals (down 2.9%) went down.
As the month-on-month increase of shipment (up 1.6%) exceeded that of inventories (up
0.1%), the manufacturing inventory-shipment ratio fell for the first time in five months.
By business category, the shipments of semiconductors and parts (up 2.1%) and metal
working (up 8.3%) increased month-on-month, while those of audio-visual communications
equipment (down 6.3%) and computers (down 4.5%) declined. The inventories of audio-
visual communications equipment (up 24.6%) and machinery (up 7.7%) climbed month-on-
month, while those of semiconductors and parts (down 3.1%) and refined petroleum
products (down 7.6%) fell.
The average operation ratio of the manufacturing sector rose 1.2 percentage points to 80.9
percent from the previous month, as the operating ratios of automobiles and semiconductors
picked up.
Manufacturing Average operation ratio (%) 74.6 79.9 78.4 80.5 83.0 82.6 81.5 79.7 80.9
activity Production capacity 3.1 3.6 4.0 5.1 5.8 6.5 6.5 6.3 6.3
1. Preliminary
2. Including mining, manufacturing, electricity and gas industry
3. Information and Communications Technology
4. End-period
Source: Statistics Korea
18 January 2011
6-1 Industrial production
Source: Statistics Korea (industrial activity trend)
6-3 Inventory
Source: Statistics Korea (industrial activity trend)
Economic Bulletin 19
7. Service sector activity
Although entertainment, cultural & sports services fell 5.0 percent due to the previous
month’s high base effect, service activity in November increased 0.8 percent month-on-
month as robust domestic consumption supported wholesale & retail sales, publishing &
broadcasting services, and educational services.
Despite sluggishness in real estate & renting, professional, scientific & technical services,
and educational services, service activity in November rose 3.6 percent year-on-year as
financial services and transportation services showed solid growth helped by increased
equity transactions and strong exports.
Service activity in December is expected to show a gradual increase from the previous
month as domestic consumption steadily increases and the Korean stock price index shows
strong performance. Meanwhile, service activity is expected to be weighed down by weak
construction markets and the outbreak of foot-and-mouth disease.
20 January 2011
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Economic Bulletin
21
8. Employment
The number of workers on payroll in November increased by 303,000 from a year earlier,
while the employment rate (seasonally adjusted) rose by 0.1 percentage point year-on-year
to 59.2 percent.
Despite decreasing employment in public administration (down 129,000), the service sector
continued to increase employment, helped by a rise in health & welfare (up 157,000),
business assistance (up 99,000), and professional, scientific & technical services (up
60,000).
By status of workers, despite a decrease in daily workers (down 33,000) and temporary
workers (down 187,000), wage workers (up 511,000) continued to expand growth as the
number of regular workers (up 731,000) increased. Non-wage workers (down 207,000)
including self-employed workers (down 166,000) continued to decline.
22 January 2011
8-1 Number of employed and employment growth
Source: Statistics Korea (employment trend)
Economic Bulletin 23
The number of unemployed persons in November decreased by 82,000 year-on-year to
737,000 as people who applied for the census jobs but were on the waiting list gained
employment. The unemployment rate (seasonally adjusted) fell 0.3 percentage points to
3.0 percent.
By gender, both male unemployment (down 51,000) and female unemployment (down
30,000) declined.
By age, unemployment decreased in all age brackets except seniors aged 50 to 59 (up 1,000)
and 60 or more (up 12,000). The youth unemployment rate dropped 1.3 percentage points
year-on-year, landing at 6.4 percent.
The economically inactive population in November was up 257,000 from a year earlier to
post 15,910,000. Meanwhile, the labor force participation rate (seasonally adjusted) was
down 0.1 percentage point year-on-year to 61.0 percent.
The number of workers quitting jobs due to housework (up 215,000), education (up 90,000),
and rest, time-off and leisure (up 4,000) increased, while those who quit jobs due to
childcare (down 103,000) decreased.
24 January 2011
8-4 Employment rate
Source: Statistics Korea (employment trend)
Economic Bulletin 25
9. Financial market
9.1 Stock market
The Korean stock market in December rose with expectations of global economic recovery.
Despite a series of international and domestic anxiety factors such as financial instability in
the eurozone, concerns over China’s tightening policy, and geopolitical risk on the Korean
peninsula, KOSPI broke the 2000-point bar, fueled by positive economic sentiment amid
improving employment statistics and the Dow Jones industrial average hitting a year high
after strong US economic data.
Despite the strong won, the won/yen exchange rate was up 14.6 won month-on-month as
concerns over China’s tightening policy and Japanese exporters’ dollar sales at the end of
the year contributed to the strong yen.
(End-period)
2006 2007 2008 2009 2010
Dec Dec Dec Dec Nov Dec Change1
Won/Dollar 929.8 936.1 1,259.5 1,164.5 1,159.7 1,134.8 2.6
Won/100Yen 783.4 828.6 1,396.8 1,264.5 1,379.0 1,393.6 -9.3
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 January 2011
9-1 Stock prices
Economic Bulletin 27
9.3 Bond market
Treasury bond yields increased in December amid concerns over rising inflationary pressure,
as the US Treasury Bond yield rallied 49 basis points in December helped by expectations of
economic recovery. In addition, worries over inflation and government’s announcement of
plans to impose Macro-prudential Stability Levy contributed to the rise.
(End-period)
2006 2007 2008 2009 2010
Dec Dec Dec Dec Oct Nov Dec Change1
Call rate (1 day) 4.60 5.02 3.02 2.01 2.26 2.51 2.51 0
CD (91 days) 4.86 5.82 3.93 2.88 2.66 2.80 2.80 0
Treasury bonds (3 yrs) 4.92 5.74 3.41 4.44 3.25 3.19 3.38 +19
Corporate bonds (3 yrs) 5.29 6.77 7.72 5.56 4.03 4.03 4.27 +24
Treasury bonds (5 yrs) 5.00 5.78 3.77 4.98 3.86 3.88 4.08 +20
1. Basis point changes in December 2010 from the previous month
In November, bank deposits turned to a decline as time deposits shifted to a decrease due
to the limited inflow of corporate funds into money market funds (MMFs). Decreasing
amounts of time deposits led by money outflows from local governments’ account also
contributed to the trend.
Despite declining redemption of equity funds, asset management company (AMC) deposits
slightly increased due to decelerating growth of money market funds (MMFs) affected by the
outflow of treasury surplus.
28 January 2011
9-4 Interest rates
Source: The Bank of Korea
Economic Bulletin 29
10. Balance of payments
Korea’s current account surplus (preliminary) in November narrowed from the previous
month to US$1.93 billion.
The goods account surplus decreased to US$3.35 billion from the previous month’s
US$5.39 billion driven by an increase in imports following domestic economic recovery and
high commodity prices.
The service account deficit contracted to post US$490 million from the previous month’s
deficit of US$870 million due to improving balance of construction services.
The primary income account turned to a deficit of US$690 million from the previous month’s
US$660 million surplus as dividend payments increased substantially. The transfer income
account deficit remained at the similar level to the previous month, slightly down from
US$280 to US$240 million.
(US$ billion)
2009 2010
Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Oct Nov1 Jan-Nov1
Current account 32.79 4.54 11.56 8.61 8.08 0.26 8.57 9.41 4.89 1.93 25.06
- Goods balance 37.87 2.82 13.55 10.92 10.58 4.79 12.18 12.29 5.39 3.35 37.99
- Service balance -6.64 -0.03 -1.29 -2.66 -2.66 -4.20 -2.11 -3.22 -0.87 -0.49 -10.88
- Income balance 2.28 0.39 -0.15 0.95 1.09 0.55 -1.01 1.30 0.66 -0.69 0.80
- Current transfers -0.71 1.36 -0.55 -0.59 -0.93 -0.87 -0.05 -0.95 -0.28 -0.24 -2.84
Source: The Bank of Korea
The capital and financial account (preliminary) in November recorded a net outflow of
US$3.31 billion, down from the previous month’s outflow of US$5.87 billion.
The direct investment account narrowed the net outflow to register US$1.29 billion from the
previous month’s deficit of US$5.39 billion as locals’ overseas investment declined.
The portfolio investment account decelerated the inflow to post US$3.49 billion from
US$7.45 billion a month earlier as foreigners’ investments in the Korean stock market
decreased amid worries over financial instability in the eurozone and geopolitical risk on the
Korean peninsula.
The financial derivatives account marked a surplus of US$110 million as gains from overseas
financial derivative transactions increased.
The other investment account deficit decreased to US$3.88 billion from the previous month’s
US$5.22 billion due to non residents’ increasing redemption of short-term borrowings.
The current account in December is expected to expand the surplus, owing to an increase in trade
surplus and an improving primary income account affected by decreasing dividend payments.
30 January 2011
10-1 Current account balance
Source: The Bank of Korea (balance of payments trend)
Economic Bulletin 31
11. Prices and international commodity prices
11.1 Prices
Despite stabilized public utility charges, consumer prices rose at a faster pace in December
as the prices of food and industrial products, and personal services fees rose. December
consumer prices rose 3.5 percent year-on-year and 0.6 percent month-on-month.
Core consumer prices, which exclude the prices of oil and agricultural products, remained
stable in December, rising 2.0 percent year-on-year and 0.3 percent month-on-month.
Consumer prices of basic necessities, a barometer of perceived consumer prices, were up
3.9 percent compared with the same month of the previous year.
Prices of agricultural, livestock and fishery products rose 1.7 percent month-on-month.
Despite falling vegetable prices, fruit and fish prices rose, resulting in an overall gain.
Prices of industrial products extended gains month-on-month (up 1.2%), as those of durable
goods and oil products surged due to rising gold and oil prices.
Public utility charges fell 0.2 percent month-on-month due in particular to decreasing phone
charges. However, personal service charges posted a slight gain month-on-month (up 0.2%)
as a result of peak season surcharges imposed on international flight fares (up 5.0%).
32 January 2011
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 December, international oil and domestic oil product prices rose from the previous month.
International oil prices (Dubai crude) rose sharply to almost US$90 per barrel amid
expectations of economic recovery, as demand for heating oil rose due to unexpected cold
spells in Europe and speculative cash inflows increased.
(US$/barrel, period average)
2007 2008 2009 2010
Annual Annual Annual Jun Jul Aug Sep Oct Nov Dec
Dubai crude 68.4 94.3 61.9 74.1 72.6 74.2 75.2 80.3 83.6 88.9
Brent crude 72.8 97.5 61.7 74.9 75.7 77.2 77.9 83.2 85.8 91.8
WTI crude 72.3 99.9 61.9 75.3 76.3 76.6 75.3 81.9 84.4 89.2
Source: KOREAPDS
Domestic oil product prices rose due to higher exchange rates and international oil prices.
International commodity prices rose in December due to concerns about supply disruptions
along with increased demand led by economic recovery.
Non-ferrous metal prices surged as supply concerns were raised amid strong demand from
China and other emerging markets.
International grain prices rose due to concerns that supply will be disrupted as a result of
bad weather in major grain-producing areas, and as China increased its grain imports.
34 January 2011
11-4 International oil prices
Source: Korea National Oil Corporation
Economic Bulletin 35
12. Real estate market
12.1 Housing market
In December, nationwide apartment sales prices increased 0.6 percent month-on-month.
Apartment sales prices in the Seoul metropolitan area increased for the first time in eight
months, rising 0.1 percent month-on-month.
Apartment sales prices in areas excluding the Seoul metropolitan area showed a continuing
strong upward trend. In particular, the prices in South Gyeongsang Province rose 2.1 percent
from the previous month and those in Busan were up 1.8 percent. Apartment prices in 5
metropolitan cities and other cities each advanced 1.2 percent and 1.0 percent, respectively.
Nationwide apartment rental prices in December were up 1.0 percent from the previous
month. In the Seoul metropolitan area the pace of an increase decelerated slightly, but
rental prices in popular school districts in Seoul, such as Gangnam (up 1.8%) and Yangcheon
(up 2.0%), showed strong growth.
Apartment sales transactions in November increased 18.0 percent from the previous month’s
72,629 to post 85,704. The transactions were up 5.0 percent from a year earlier and 19.0 percent
compared with the monthly average of 72,000 recorded in the same month for the past 3 years.
36 January 2011
12-1 Real estate prices
Source: Kookmin Bank (national housing price trend)
Economic Bulletin 37
12.2 Land market
Nationwide land prices in November went up for the first time in three months, rising 0.03
percent month-on-month, which is 2.31 percent lower than the pre-crisis peak reached in
October 2008.
Land prices in the Seoul metropolitan area rose for the first time in five months, led by Seoul
(up 0.02%) and Gyeonggi Province (up 0.04%).
Land price increases in areas excluding the Seoul metropolitan area continued in November,
led by Daejeon (up 0.23%), Busan (up 0.09%) and South Gyeongsang Province (up 0.08%).
Nationwide land transactions in November recorded 208,000 land lots, increasing 14.9
percent from the previous month and 0.7 percent year-on-year.
Land transactions in Ulsan (up 42.9%), Seoul (up 29.3%), and South Gyeongsang Province
(up 21.3%) increased significantly.
38 January 2011
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 the coincident composite index fell 0.7 points month-on-month to
99.2 in November.
All components of the coincident composite index excluding service activity fell compared to
the previous month.
The year-on-year leading composite index in November fell 0.8 percentage points from the
previous month due to previous year’s high base effect and a decline in leading composite index.
Among components of the leading composite index, the composite stock price index and
consumer expectations index rose while the other eight indices fell.
2010
May Jun Jul Aug1 Sep1 Oct1 Nov1
Coincident composite index (m-o-m, %) 0.7 0.8 0.9 0.3 -0.4 -0.9 -0.2
Cyclical indicator of coincident composite index 101.4 101.7 102.2 102.1 101.2 99.9 99.2
(m-o-m, p) 0.3 0.3 0.5 -0.1 -0.9 -1.3 -0.7
Leading composite index (m-o-m, %) 0.6 0.3 0.9 0.2 0.0 -0.7 -0.1
12 month smoothed change
in leading composite index (%) 8.0 7.1 6.8 5.9 4.9 3.4 2.6
40 January 2011
13-1 Cyclical indicator of coincident composite index
Source: Statistics Korea
Economic Bulletin 41
Policy Issues
Comprehensive Measures to Counter Inflation
Background
The Korea government announced measures to control price-hikes amid growing inflationary
expectations, as international commodities and agricultural product prices are rising and
domestic demand is increasing backed by improved income and ample liquidity. The
government needs to curb the inflationary expectations, which will make price-hikes hard to
control. To avoid inflationary expectations the current price situation might bring, the
government decided to take price-stabilizing measures, which include year-round
monitoring of prices, and most of which will be adopted in the first half of 2011.
The government puts its first priority of 2011’s first half on stable prices. To this end, it will
take measures of both long-term as well as short-term to prevent inflationary expectations
from raising prices.
42 January 2011
The major causes of the current inflationary expectations came from volatile agricultural and
petroleum product prices, and public utility charges and tuition bound to increase. To
prevent those causes from affecting inflation, the government will reduce customs tariffs to
minimize the impact from rising international commodity prices, and offer financial and tax
incentives aimed at encouraging both the private and public sectors to contribute to
stabilizing prices. In addition, the government is positively considering freezing public utility
charges, and will monitor the level of local prices and college tuition fees. The government
will also respond to unfair and illegal price-setting practices such as price-fixing. On top of
those short-term measures, the government will continue to pursue long-term measures
which aim to maintain balance between supply and demand and reform distribution
systems. The long-term measures will be closely monitored and their subsequent results will
be reflected in the future policies.
The joint ministerial system to swiftly respond to inflationary pressure will be launched,
which will provide across the board price information collected by each ministry. Under the
system, each ministry is responsible for monitoring the prices of the items it concerns, and is
obliged to field-monitor supply-demand situations of the items. Ministries will exchange
price information at the weekly joint ministerial meeting, where ways to respond to any
changes in prices will be sought.
Economic Bulletin 43
- Promoting direct sales of agricultural products (year-round)
- Building a web-site to help direct sales of agricultural products (May)
- Organizing a committee for international grain price analyses (January)
- Establishing an overseas firm to facilitate grain supply, through which 0.1 million tons of
corn and beans will be imported in 2011 (May)
44 January 2011
Ministry of Land, Transportation, and Maritime Affairs
- Increasing the supply of rental houses, early providing the publicly planned affordable
houses, Bogumjari houses, and encouraging private builders to construct small-sized
houses in cities (January and February)
- Increasing loan support for those who want to rent houses (from January on)
- Providing real-time price information on rental houses (February)
- Easing regulations on housing construction, which includes the abolition of the price ceiling
for new apartments and less time taken for housing construction permits (February)
Economic Bulletin 45
Economic
News Briefing
The Bank of Korea set the inflation target for the 2010-2012 period at the level of 3.0 ±1
percent at its Monetary Policy Committee meeting held on January 6, 2011. The bank
projected that the domestic economy will maintain its growth trend, with local consumer
prices rising above the inflation target. This is attributable to the continuing upturn in
economic activities along with rising international commodity prices, wages and rents.
2009 20101
1st half 2nd half Annual
GDP growth 0.2 6.1 3.8 5.0 4.5
CPI inflation 2.8 2.9 3.7 3.3 3.5
1. Preliminary
Source: Bank of Korea Economic Outlook for 2011 (released on December 10, 2010)
In implementing monetary policy for 2011, the Bank of Korea will put priorities on both
economic growth and price stabilization. In addition, the central bank will enhance its
capacity to adjust liquidity, improve the predictability and transparency of monetary policy,
and strengthen efforts for financial stability. In particular, the Bank of Korea will ensure that
Macro-prudential Stability Levy takes effect from the second half of this year.
Meanwhile, the Monetary Policy Committee of the Bank of Korea decided on January 13, 2011 to
raise its benchmark interest rate by 25 basis points to 2.75 percent in an effort to curb inflation.
46 January 2011
Korea introduces Macro-prudential Stability Law to reduce volatility
On December 19, 2010, the Korean government announced plans to impose Macro-prudential
Stability Levy on non-deposit foreign currency liabilities held by domestic and foreign banks.
Currently, Korea is faced with massive capital inflows caused by the exceptionally low interest
rates and quantitative easing measures in advanced countries. A surge of capital inflows
could lead to inflation and asset price bubbles, and a sudden reversal of such inflows could
possibly result in a systemic risk. Against these backdrops, the Korean government plans to
adopt the Levy as a pre-emptive and precautionary measure.
The Levy will be charged on non-deposit foreign currency liabilities appeared in bank
balance sheets. The Levy will first apply to banks including domestic banks and foreign bank
branches given that they represent a large portion of the financial sector, with high
possibility of posing systemic risks. However, the Levy will gradually apply to all financial
institutions including domestic financial institutions. In addition, the Levy will vary according
to debt maturity. Short-term debt will be subject to higher Levy rate compared with long-
term debt as the former poses higher risk than the latter. The related legislation will be
submitted to the National Assembly in February and is expected to take effect from the
second half of this year.
The Korean government plans to issue 82.4 trillion won worth of government bonds in 2011,
up 4.7 trillion won from the previous year’s 77.7 trillion won. The Ministry of Strategy and
Finance announced on December 30, 2010 that the government bonds will be issued evenly
every month in order to ensure the stability of the bond trading market. Among the 82.4
trillion won of government bonds to be issued this year, 21 trillion won will be deficit-
covering bonds and 34.3 trillion won will be used to repay previous debts.
The issue ratio by maturity will be similar to 2010 levels in general, but may be adjusted
depending on the changes in market demand. The target ratio is 20 to 30 percent for 3-year
bonds, 30 to 40 percent for 5-year bonds, 25 to 35 percent for 10-year bonds, and 5 to 15
percent for 20-year bonds. The government is also planning to increase issuance of inflation-
indexed government bonds, as growing demand for those bonds is expected amid rising
inflationary pressures.
Economic Bulletin 47
Korea unveils the five-year plan for improving ODA programs
The government will create a joint task force team in the Prime Minister’s Office to draw
effective ODA programs based on the Saemaul Movement, Korea’s rural development
scheme from the 1970s that is regarded as a successful development model for developing
countries. Meanwhile, during the committee session, participants discussed measures for
successful hosting of the Fourth High Level Forum on Aid Effectiveness (HLF-4), which will
take place in Busan from November 29 to December 1, 2011.
Korea posted a record high trade surplus of US$41.7 billion in 2010, the Ministry of
Knowledge Economy said on January 1, 2011. Exports increased 28.6 percent year-on-year to
record US$467.4 billion while imports gained 31.8 percent to post US$425.7 billion. For
December, exports jumped 23.1 percent year-on-year to US$44.3 billion, while imports rose
23.3 percent to US$ 40.6 billion. Among 70 major exporters in the World Trade Organization
(WTO), Korea ranked 7th for the first 10 months in 2010.
48 January 2011
Meanwhile, foreign direct investment (FDI) in 2010 rose 13.8 percent year-on-year to post
US$13.07 billion, the highest level in a decade, the Ministry of Knowledge Economy
announced on December 30, 2010. Although global FDI remained sluggish in 2010, the
inflow of foreign capital into Korea increased due to Korea’s sound economic fundamentals.
FDI in the manufacturing sector rose 75.6 percent year-on-year to post US$6.54 billion, while
service-related investments fell 18 percent to US$6.23 billion. New growth engine sectors
accounted for 23.6 percent of all investments.
The “Miso Credit Foundation”, a microcredit lending program in Korea to support low-
income households, marked its first anniversary with the 100th branch opening on December
16, 2010 in Seoul. Starting with the Samsung Miso Credit Foundation office in Suwon, which
opened on December 15, 2009, 45 branches have been established in the Seoul
metropolitan area and 55 branches in various provincial cities. The credit program is
operated by 31 banks including Kookmin, Woori, Shinhan, Hana, and Industrial Bank of
Korea (IBK), and 49 companies in non-financial sectors, such as Hyundai-Kia, LG, SK, POSCO
and Lotte.
According to the Financial Services Commission, the Miso Credit Foundation has provided a
total of 101.9 billion won to 21,223 people through microcredit loans and micro insurance from
January to December 15, 2010. 12,865 people have borrowed loans worth 99.7 billion won
from the foundation, and 8,358 people have received micro insurance worth 4.1 billion won.
Economic Bulletin 49
50 January 2011
Statistical
Appendices
Tables & Figures
1. National accounts
2. Production, shipment and inventory
3. Production capacity and operation ratio
4. Consumer goods sales index
5. Consumer goods shipment index and consumer sentiment index
6. Machinery orders received, domestic machinery shipment,
and estimated facility investment index
7. Value of construction completed and domestic construction orders received
8. Composite indices of business cycle indicators and BSI
9. Balance of payments (I)
10. Balance of payments (II)
11. Prices
12. Employment
13. Financial indicators
14. Monetary indicators
15. Exchange rates
Economic Bulletin 51
1. National accounts
(year-on-year change, %, chained 2005 year prices)
52 January 2011
Growth rate by economic activity
Economic Bulletin 53
2. Production, shipment and inventory See graphs 6-1, 6-3, 7-1, 7-2 & 7-3
(constant prices, 2005 = 100)
Service
Production Shipment Inventory
Period Y-o-Y Y-o-Y Y-o-Y production Y-o-Y
index index index
change (%) change (%) change (%) index change (%)
54 January 2011
3. Production capacity and operation ratio See graph 6-2
Economic Bulletin 55
4. Consumer goods sales index See graphs 2-2, 2-3, 2-4 & 2-5
(constant prices, 2005 = 100)
Consumer
goods
Period Durable Semi-durable Non-durable
sales
Y-o-Y goods Y-o-Y goods Y-o-Y goods Y-o-Y
index
change (%) change (%) change (%) change (%)
56 January 2011
5. Consumer goods shipment index and consumer sentiment index
See graph 2-6
Domestic consumer
goods shipment index Consumer
Period (2005=100) Durable Non-durable sentiment index
Y-o-Y goods Y-o-Y goods Y-o-Y
change (%) change (%) change (%)
Economic Bulletin 57
6. Machinery orders received, domestic machinery shipment
and estimated facility investment index See graph 3-2
Domestic machinery orders received Domestic
Estimated
excluding ship (billion won, constant prices) machinery
facility investment
Period shipment
index
excluding ship
Total Public Private (2005=100)
Manufacturing (2005=100)
58 January 2011
7. Value of construction completed and domestic construction
orders received See graphs 4-2 & 4-3
(current prices, billion won)
Economic Bulletin 59
8. Composite indices of business cycle indicators and BSI
See graphs 13-1, 13-2 & 13-3
Cycle of
Leading Coincident
coincident
Period index Y-o-Y index BSI (results) BSI (prospects)
index
(2005=100) change (%) (2005=100)
(2005=100)
2011 1 - - - - - 101.8
Source: Statistics Korea & The Federation of Korean Industries
60 January 2011
9. Balance of payments (I) See graphs 5-1, 5-2, 5-3, 10-1 & 10-2
(million US$)
Economic Bulletin 61
10. Balance of payments (II) See graph 10-3
(million US$)
62 January 2011
11. Prices See graphs 11-1, 11-2 & 11-3
(2005 = 100)
Producer prices
Consumer prices Export & import prices
(2005=100)
Period
All Items Commodity Service Core All items Commodity Export Import
Economic Bulletin 63
12. Employment See graphs 8-1, 8-2 & 8-3
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
9 24,911 24,054 4,062 18,216 3.4 17,103 10,217 5,106 1,780
10 25,004 24,172 4,098 18,264 3.3 17,178 10,280 5,089 1,809
11 24,847 24,109 4,139 18,340 3.0 17,300 10,334 5,069 1,898
Y-o-Y change (%)
2009 0.2 -0.3 -3.2 0.5 - 1.5 4.3 0.4 -7.4
64 January 2011
13. Financial indicators See graphs 9-1 & 9-4
(period average)
Economic Bulletin 65
14. Monetary indicators See graph 9-5
(period average) (billion won)
66 January 2011
15. Exchange rates See graphs 9-2 & 9-3
Economic Bulletin 67
Editor-in-Chief
Bang, Moon-Kyu (MOSF)
Editorial Board
Kim, Young-Min (MOSF)
Shim, Jae-Hak (KDI)
Lee, In-Sook (KDI)
Coordinators
Kim, Dae-Hyun (MOSF)
Cho, Hyun-Joo (KDI)
Editors
Cho, Eun-Hyung (MOSF)
Kang, Ji-Eun (KDI)
Lee, Ji-Youn (KDI)
Ministry of Labor
http://english.molab.go.kr/english
Statistics Korea
http://kostat.go.kr