Economic Bulletin (Vol.32 No.2)

8/14/2019 Economic Bulletin (Vol.32 No.2)

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SpecialThe G-20 Seoul Summit 3

The Green Book: Current Economic Trends

Overview 5

1. Global economy 62. Private consumption 10

3. Facility investment 14

4. Construction investment 16

5. Exports and imports 18

6. Mining and manufacturing production 20

7. Service sector activity 22

8. Employment 24

9. Financial markets 28

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

10. Balance of payments 32

11. Prices and international commodity prices 34

11.1 Prices11.2 International oil and commodity prices

12. Real estate market 38

12.1 Housing market12.2 Land market

13. Composite indices of business cycle indicators 42

Policy IssuesThe National Strategy Meeting on Employment &

Job Creating Policies 44

Economic News Briefing 47

Statistical Appendices 53

Republic of Korea

Economic Bulletin

Vol. 32 | No. 2


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Economic Bulletin 3

s p e c i a l

The G-20 Seoul Summit

Overview

In response to the global financial crisis in late 2008, the first G-20 Summit was convened in

Washington, D.C. on November 14-15, 2008, followed by successive summits in London and

Pittsburgh. The G-20 Summits have responded with swift, bold and coordinated actions to

overcome the crisis, helping the world economy move out of recession faster than expected.

The G-20 was designated as the premier forum for international economic cooperation at thePittsburgh Summit, thanks to its proven accomplishments.

From January 27 to 29, President Lee Myung-bak visited Switzerland to participate in the

40th World Economic Forum and delivered a special address on January 28, introducing the

Korean governments overall plans to host the G-20 Summit in Seoul this year and

emphasizing the significance of the Summit. In the address, President Lee Myung-bak

unveiled the direction of the G-20 Seoul Summit for the first time on the global stage,

representing the chair and host country of this years summit.

Priorities for the G-20 Seoul Summit

The following is a summary of the special address President Lee Myung-bak delivered at the

World Economic Forum with the title of G-20 Seoul Summit: Priorities and Challenges.

1. Successful implementation of the Framework for Strong, Sustainable and Balanced

Growth

As the global economy moves into the path of recovery, the G-20 Seoul Summit will focus on

implementing the agreements of the previous summits. Placing emphasis on the longer-

term framework for policy coordination, the G-20 Seoul Summit will endeavor to achieve the

successful implementation of the Framework for Strong, Sustainable and Balanced

Growth, agreed at the Pittsburgh Summit.

In addition, the initiatives taken at previous summits on improvement of financial regulation

toward a more resilient global financial system and the reform of international financial

institutions such as the IMF and the World Bank will be followed up. Devoted efforts will also

be made toward reaching agreement on a stronger and more effective early warning and

surveillance mechanism at the international level.


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4 February 2010

s p e c i a l

As past G-20 Summits have played a pivotal role in resisting protectionist pressure, the

Seoul Summit will continue its effort to guard against protectionism. In this regard,

concluding the Doha Development Agenda (DDA) before the end of the year should be given

the highest priority.

2. Balanced growth of the world economy and the establishment of a Global Financial

Safety Net

Development issues to achieve balanced and sustainable growth will be added to the

agenda for discussion at the G-20 Seoul Summit. Although it is important to address the

weaknesses in the financial regulatory system of the advanced countries, there are also

many pressing policy and reform issues for emerging and developing countries.

In addition, the construction of a Global Financial Safety Net to better prepare for sudden

reversals of international capital flows will be included in the agenda. Along with theestablishment of such a financial safety net, arrangements aimed at successful

implementation of bilateral and regional cooperation should be placed.

3. Extensive outreach efforts toward non-G-20 countries

The G-20 Seoul Summit will be opened to non-member states and the private sector to share

the outcome of the strong and sustainable growth. Extensive outreach efforts to countries

outside the G-20 will be conducted through consultations with the United Nations and other

international bodies. In addition, the private sector business community will be given

opportunities to participate in the November G-20 Summit. As part of the initiative to

underline the role of the business community, a business summit will take place at the

venue of the G-20 Seoul Summit.

Date Meeting Location

Feb 27-28 G-20 Deputies Meeting Songdo, Incheon, Korea

Apr 23 G-20 Finance Ministers & Central Bank Governors Meeting Washington, D.C., USA

Jun 3-5 G-20 Finance Ministers & Central Bank Governors Meeting Busan, Korea

Jun 26-27 G-20 Summit Toronto, Canada

Mid Sep G-20 Deputies Meeting Gwangju, Korea

Early Oct G-20 Finance Ministers & Central Bank Governors Meeting Washington, D.C., USA

Late Oct-Early Nov G-20 Finance Ministers & Central Bank Governors Meeting Gyeongju, Korea

Nov 11-12 G-20 Summit Seoul, Korea

Key meetings1 for the G-20 in 2010

1. Please note that dates of meetings in the latter half of 2010 are subject to flexible scheduling and should not be considered final except for the G-20 Summit

held on November 11-12.


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Economic Bulletin 5

The Korean economy stays on an upward track although it has been bothered by externaluncertainties as well as temporary factors such as a high base effect from recent fastrecovery, the H1N1 flu pandemic, heavy snow and an unusual cold wave.

Mining and manufacturing production in December 2009 rose 3.5 percent month-on-monthand 33.9 percent year-on-year, affected by brisk exports and shipments. Service outputincreased 1.8 percent month-on-month and 5.3 percent year-on-year, thanks to robustwholesale and retail sales.

Consumer goods sales climbed both month-on-month and year-on-year in December by 1.7percent and 12.1 percent, respectively, backed by surging durable goods sales, in particularautomobile sales, and improving semi and non-durable goods sales.

Facilities investment in December soared by 4.0 percent month-on-month and 21.0 percentyear-on-year, helped by recovering machinery investment. Construction completedcontinued to grow for the second consecutive month, up 2.3 percent month-on-month and13.1 percent year-on-year, as both the public and private sector indices increased.

The total number of workers hired deepened a decline year-on-year from a loss of 10,000 to16,000 in December, as hiring in the agriculture, forestry & fishery significantly dropped. Theunemployment rate increased month-on-month from 3.3 percent to 3.5 percent.

Exports in January 2010 jumped 47.1 percent year-on-year, positively affected by a low baseeffect and the recovering global economy. Imports soared 26.7 percent year-on-year, as anunusual cold wave increased crude oil imports and a low base effect lifted the figure.

Consumer prices in January rose 3.1 percent year-on-year, as heavy snowfalls and a coldwave pushed up the prices of agriculture, livestock & fishery products as well as petroleumproducts.

In January, uncertainties in the financial market increased, affected by the US new bankingregulation called the Volcker rule, Chinas tightening liquidity policies and worries oversovereign credit risks in European countries.

To sum up, although the Korean economy has continued to improve in line with the globaleconomy gradually recovering, external uncertainties grow as oil prices are rising, China istightening its liquidity, and some European countries are facing credit risks.

The Korean government, to secure economic recovery and prepare for uncertainties at home

and abroad will keep pursuing expansionary fiscal policies and spend budgets as planned,while continuing its efforts to create jobs and support the working class.On the other hand,the government will keep an eye on any changes in internal and external uncertaintiesincluding real estate markets and international financial markets.

The Green BookCurrent Economic Trends

Overview


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6 February 2010

1. Global economy

The global economy continued its upward momentum, as major countries such as the U.S.

and China grew faster than expected in the fourth quarter of 2009. Reflecting this trend, the

IMF and the World Bank revised their 2010 growth outlook for the world economy upward to

3.9 percent from 3.1 percent and to 2.7 percent from 2.3 percent, respectively. However,

uncertainties still remain, as swollen fiscal deficits in European countries such as Portugal,

Greece, and Spain are fueling concerns about sovereign credit risk.

US real GDP jumped 5.7 percent in the fourth quarter (annualized q-o-q, advanced

estimates), thanks to a slower rate of inventory decumulation, a facility investment rebound,

and an increase in private consumption.

However, consumption was still not in full recovery in December, as retail sales contracted

0.3 percent month-on-month, while industrial production increased 0.6 percent.

New home sales in December fell 7.6 percent and existing home sales tumbled 16.7 percent

month-on-month, fanning worries about the U.S. housing market seemingly away from

recovery.

In December, non-farm payrolls declined at a faster pace, while the unemployment rate

stayed flat at 10.0 percent.

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

27 that it would maintain the target range for the federal funds rate at 0.0 to 0.25 percent,

and reaffirmed its plan to withdraw the emergency measures for liquidity provision including

the purchase of US$1.25 trillion of agency mortgage-backed securities by March 31 and the

Term Asset-Backed Securities Loan Facility (TALF) by June 30.

US

(Percentage change from previous period)

Annual Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec

Real GDP1

- Personal consumption expenditure- Corporate fixed investment

- Construction investment for housing

Industrial production

Retail sales

New home sales

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

Consumer prices (y-o-y, %)

2008 2009

1. Annualized rate (%)

2. Monthly average

Source: US Department of Commerce

0.4

-0.21.6

-22.9

-1.8

-0.7

-37.4

-257

3.8

-2.7

-3.5-6.1

-15.9

-2.3

-1.5

-9.8

-208

5.2

-5.4

-3.1-19.5

-23.2

-3.4

-6.7

-15.0

-553

1.5

-2.4

-0.6-17.9

-20.4

-9.7

-6.0

-22.6

-347

-0.3

-6.4

0.6-39.2

-38.2

-5.2

-1.2

-13.5

-691

-0.2

-0.7

-0.9-9.6

-23.3

-2.7

-0.3

9.9

-428

-0.9

2.2

2.8-5.9

18.9

1.7

1.6

9.2

-199

-1.6

5.7

2.02.9

5.7

1.7

1.7

-8.0

-69

1.5

-

--

-

0.6

-0.3

-7.6

-85

2.7


8/73

Economic Bulletin 7

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


9/73

8 February 2010

The Chinese economy expanded 10.7 percent in the fourth quarter of 2009, posting anannual growth of 8.7 percent, as domestic demand such as investment and consumptioncontinued to improve and exports rebounded. The Chinese government, in an attempt tocurb rising real estate prices, raised banks reserve ratio and imposed stricter requirementson new loans as ways to tighten liquidity.

Japans economy saw its industrial production continue to grow, as exports in December2009 rebounded year-on-year by 12.0 percent for the first time since October 2008.However, domestic demand remains sluggish and consumer prices decreased for ninemonths in a row since March 2009, indicating deflation continued to take its course.

The eurozone economy is recovering at a slow pace, as consumption is still weak and theunemployment rate in November reached 10 percent, showing deteriorating labor markets inEurope. Enormous fiscal deficits in Portugal, Italy, Greece, and Spain downgraded theircredit ratings, fueling sovereign debt concerns.

China

Japan

(Percentage change from same period in previous year)

Real GDP

Fixed asset investment (accumulated)

Retail sales


ExportsConsumer prices

Producer prices

2008 2009

Annual

9.0

26.1

21.6

12.9

17.25.9

6.9

Q3

9.0

27.6

23.2

13.0

22.95.3

9.7

Q4

6.8

26.1

20.6

6.4

4.12.5

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

0.20.7

-2.1

Nov

-

32.1

15.8

19.2

-1.20.6

-2.1

Dec

-

30.5

17.5

18.5

17.71.9

1.7

Source: China National Bureau of Statistics

Home prices (y-o-y, %)

-0.6 (May 2009) 0.2 (Jun) 1.0 (Jul) 2.0 (Aug) 2.8 (Sep) 3.9 (Oct) 5.7 (Nov) 7.8 (Dec)

Eurozone

Source: Eurostat

Real GDP


Retail sales

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

2008 2009

(Percentage change from previous period)

Annual

0.8

-1.8

-0.7

3.63.3

Q3

-0.3

-1.7

-0.5

5.33.8

Q4

-1.8

-8.0

-0.7

-5.02.3

Q1

-2.5

-8.6

-0.8

-21.31.0

Q2

-0.2

-1.0

-0.3

-23.40.2

Q3

0.4

2.1

-0.3

-19.1-0.4

Q4

-

-

-0.2

-0.4

Nov

-

1.1

-0.5

-5.80.5

Dec

-

-

0.0

-0.9

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(Percentage change from previous period)

Annual

-0.7

-3.4

0.3

-3.5

1.4

Q3

-1.0

-3.3

0.8

3.2

2.2

Q4

-2.7

-17.7

-1.5

-23.1

1.0

Annual

-

-22.3

-2.3

-33.1

-1.4

Q1

-3.1

-17.2

-3.9

-46.9

-0.1

Q2

0.7

14.6

-0.9

-38.5

-1.0

Q3

0.3

5.9

-3.4

-34.4

-2.2

Q4

-

4.7

-0.8

-8.0

-2.0

Dec

-

2.2

-0.3

12.0

-1.7


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Economic Bulletin 9

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


11/73

10 February 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 December 2009 rose 1.7 percent month-on-month or 12.1 percentyear-on-year, thanks to the brisk sales of durable goods, in particular automobiles, andsemi-durable goods.

Durable goods sales posted a fourth month-on-month increase of 2.8 percent, while soaring44.4 percent year-on-year, due to solid automobile sales backed by tax incentives set toexpire at the end of 2009.

Semi-durable and non-durable goods sales increased 2.3 percent and 0.9 percent month-on-month or 7.4 percent and 0.7 percent year-on-year, respectively, as sales picked up towardthe end of the year.

Sales at department stores jumped 15.5 percent year-on-year, continuing an upward marchfor ten months in a row, while sales at specialized retailers posted double-digit growth forthe third straight month.


Consumer goods sales

(Seasonally adjusted)2

- Durable goods3

Automobiles

- Semi-durable goods4

- Non-durable goods5

1. Preliminary

2. Percentage change from previous period

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

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

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

Source: Statistics Korea

2008 2009

Annual

1.0

-

1.9

-2.0

-2.4

0.7

Q4

-4.2

-3.5

-9.9

-19.5

-9.9

-0.4

Annual1

2.7

-

7.5

21.9

0.9

1.5

Q1

-4.9

0.4

-13.6

-21.3

-0.9

-1.4

Q2

1.6

5.0

4.0

18.4

0.3

1.0

Q3

3.4

1.5

9.9

29.7

0.2

2.0

Q41

10.6

3.7

32.6

73.3

3.8

4.1

Oct

9.8

2.9

15.6

36.1

3.6

10.0

Nov 1

9.9

-1.1

39.6

108.4

0.6

1.9

Dec1

12.1

1.7

44.4

88.6

7.4

0.7


Annual Q4 Annual1 Q1 Q2 Q3 Q41 Oct Nov1 Dec1

- Department stores

- Large discounters

- Specialized retailers2

2008 2009

1. Preliminary

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


0.5

2.2

-1.7

-5.0

-1.2

-8.1

5.3

-1.9

2.9

1.4

-5.0

-6.9

2.8

-2.9

2.6

6.5

-3.2

4.5

10.4

3.4

12.1

12.0

5.5

10.7

4.1

-1.0

12.5

15.5

5.6

13.2


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


12/73

Economic Bulletin 11

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



13/73

12 February 2010

Consumer goods sales in January 2010 are projected to slightly decline from a month earlier,given temporary factors such as shrinking consumption caused by heavy snow and a coldwave and decreasing automobiles sales affected by the termination of tax incentives.

Domestic sales of Korean automobiles shed around 38,000 units from the previous month,due to the expiration of the tax break for new car purchases.

Sales at department stores grew 4.9 percent from a year earlier, while sales at largediscounters dropped 11.9 percent.

Gasoline sales continued a downward trend for the third consecutive month, due to therising prices, heavy snow and a cold wave.

The Hope Employment Project suspended in January, rising consumer prices, and growingvolatility in financial markets are likely to negatively affect recovery in consumption.

Private consumption, drifted away from a recovery track, is expected to be back on trackafter February when temporary factors behind shrinkage in consumption disappear.

The Consumer Sentiment Index, staying on an upward trend above the benchmark 100 fornine straight months since May 2009, is also expected to positively affect recovery in privateconsumption.

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

10.9 (Aug 2009) 14.7 (Sep) 9.4 (Oct) 18.3 (Nov) 20.0 (Dec) 20.2 (Jan 2010)

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


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

-1.5 (Aug 2009) -6.0 (Sep) 4.5 (Oct) -2.8 (Nov) 3.9 (Dec) -11.9 (Jan 2010)

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


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

4.0 (Aug 2009) -0.3 (Sep) 20.7 (Oct) -3.0 (Nov) -4.4 (Dec) -0.4 (Jan 2010)

Source: Ministry of Knowledge Economy

The Credit Finance Association

Korea Automobile Manufacturers Association

Korea National Oil Corporation

Ministry of Strategy and Finance (for data of January 2010)

Number of workers hired (y-o-y, ten thousand)

-7.6 (Jul 2009) 0.3 (Aug) 7.1 (Sep) 1.0 (Oct) -1.0 (Nov) -1.6 (Dec)



KOSPI (end-quarter)

1,592 (Aug 2009) 1,673 (Sep) 1,581 (Oct) 1,556 (Nov) 1,683 (Dec) 1,602 (Jan 2010)

The won/dollar exchange rate (end-quarter)

1,245 (Aug 2009) 1,189 (Sep) 1,201 (Oct) 1,167 (Nov) 1,168 (Dec) 1,157 (Jan 2010)

Domestic sales of Korean automobiles (ten thousand units)

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

Retail sales (excluding automobiles, m-o-m, %)

0.1 (Aug 2009) -0.2 (Sep) 1.9 (Oct) -0.4 (Nov) 1.2 (Dec)

Consumer Sentiment Index (CSI)

109 (Jul 2009) 114 (Aug) 114 (Sep) 117 (Oct) 113 (Nov) 113 (Dec) 113 (Jan 2010)


14/73


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)


15/73

14 February 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 December 2009 rose 21.0 percent year-on-year or 4.0 percent month-

on-month, as machinery investment, in particular that in semi-conductor equipment,continued to increase.

Machinery investment increased 6.4 percent month-on-month, while investment in

transportation equipment fell 4.0 percent month-on-month due to an investment decline in

miscellaneous transportation equipment including vessels.

Facility investment in January will likely continue an upward trend, given steady corporate

investment confidence and improving leading indicators such as rising domestic machinery

orders and increasing 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

Annual

8.2

-

7.5

11.3

20.6

-11.4

24.5

21.1

1.7

Annual

-4.3

-

-5.7

1.5

-5.5

4.9

-6.2

6.4

-2.2

Q4

-13.4

-9.3

-14.5

-9.0

-47.3

-3.5

-53.9

-11.5

-15.6

Annual1

-8.1

-

-13.0

11.8

-8.6

62.5

-16.2

-16.6

-3.7

Q1

-17.7

-11.6

-21.9

0.4

-33.8

150.5

-42.9

-27.9

-18.9

Q2

-13.4

6.6

-19.5

11.3

-14.1

30.9

-18.5

-27.4

-8.5

Q3

-10.1

4.2

-17.2

19.6

6.5

281.3

-12.4

-15.9

1.6

Q41

10.7

13.4

9.5

15.5

25.6

-26.3

42.0

-7.2

13.2

Oct

0.5

-5.6

0.6

0.0

3.0

-75.7

26.9

-17.3

-2.9

Nov1

11.1

7.7

8.4

21.3

57.7

108.8

47.7

21.6

15.2

Dec1

21.0

4.0

19.2

28.0

24.5

-44.6

56.5

24.7

32.0


Sep Oct Nov Dec Jan Feb

Business survey indices (base=100) for 95 100 96 98 103 101manufacturing facility investment projections

2009 2010


16/73


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


17/73

16 February 2010

4. Construction investment

Construction investment (advanced estimates of GDP ) in the fourth quarter rose 3.9

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

Construction completed (current value) in December 2009 rose 13.1 percent year-on-year, asconstruction completed in the private sector increased along with the public sector, landing

at 10.9 percent, the first double digit growth since September 2008. Both building

construction and civil engineering works climbed by 9.5 percent and 17.4 percent,

respectively.

Construction investment in January is projected to fall slightly from the previous month,negatively affected by seasonal factors such as heavy snow and a cold wave. Business

survey index for construction projections dropped to 73.2, the level seen in April 2009.


Construction investment1


- Building construction

- Civil engineering works

1. 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

Annual

6.6

-

8.4

4.6

23.6

40.3

16.5

13.3

Annual

4.7

-

6.5

1.7

-9.0

9.1

-15.8

-20.1

Q4

-2.2

-6.2

8.7

-9.1

-6.5

5.0

-15.3

-41.9

Annual

3.7

-

21.3

-5.1

1.8

58.1

-22.3

-12.9

Q1

4.5

7.7

24.4

-5.0

-16.5

22.0

-38.4

-31.6

Q2

7.0

2.2

32.1

-5.2

-2.0

186.5

-62.4

-32.7

Q3

-0.6

-6.6

21.7

-11.3

9.1

75.6

-10.7

-4.6

Q4

4.1

2.6

10.5

1.1

11.1

13.2

16.0

13.1

Oct

-5.2

-2.9

4.9

-9.6

27.2

89.7

16.3

-29.5

Nov1

3.6

0.6

8.1

2.3

77.0

64.6

85.6

14.1

Dec1

13.1

2.3

16.7

10.9

-19.5

-32.2

-10.0

42.7

Source: The Construction and Economy Research Institute of Korea

Sep Oct Nov Dec Jan

Business survey indices (base=100) for 92.8 110.8 90.1 83.6 74.8construction projections

2009 2010


18/73


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


19/73

18 February 2010

5. Exports and imports

Exports in January rose 47.1 percent year-on-year to US$31.08 billion.

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

and the global economic recovery. However, daily average exports in working-day-adjusted

terms fell from the previous month, affected by seasonal factors and a decrease in vessel

exports which dropped from the previous months US$4 billion to US$1.9 billion.

By export category, semiconductors (up 121.6%) and liquid crystal devices (up 103.4%)

surged, and by regional category, exports to China (up 98.9%) and the ASEAN (up 63.0%)

greatly improved.

Imports in January jumped 26.7 percent year-on-year to US$31.55 billion due to a low base

effect and an increase in imports of crude oil by 44.1 percent and petroleum products by201.0 percent, backed by a cold wave. Average daily imports in working-day-adjusted-terms

slightly increased from the previous month. Imports of capital goods, raw materials and

consumer goods all expanded greatly year-on-year.

The trade balance in December shifted to a deficit for the first time in eleven months, posting

a loss of US$470 million. In January, trade balance usually declines as exports fall greatly

due to decreasing year-end demand. However in February, trade balance is projected to

return to the black.

Raw materials (y-o-y, %)

-42.8 (Q2, 2009) -39.3 (Q3) -2.3 (Q4); 24.1 (Dec) 25.5 (Jan 2010)

Capital goods (y-o-y, %)

-23.6 (Q2, 2009) -13.7 (Q3) 8.2 (Q4); 28.1 (Dec) 32.1 (Jan 2010)

Consumer goods (y-o-y, %)-24.4 (Q2, 2009) -20.9 (Q3) 4.6 (Q4); 12.4 (Dec) 19.1 (Jan 2010)

(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

0.87

24.90

-31.4

1.16

Nov

33.99

17.9

1.48

29.53

2.4

1.28

Dec

36.01

32.8

1.50

32.92

23.9

1.37

Jan

31.08

47.1

1.38

31.55

26.7

1.40

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

Nov

4.46

Dec

3.08

Jan

-0.47

Source: Korea Customs Service


20/73


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


21/73

20 February 2010

6. Mining and manufacturing production

Mining and manufacturing production rose 3.5 percent month-on-month in December 2009,

thanks to brisk exports and domestic shipments, while year-on-year it soared 33.9 percent.

By business category, semiconductors and parts (up 109.2%), automobiles (up 59.0%), andprimary metals (up 36.5%) posted an increase year-on-year, whereas beverages (down

12.4%) and refined petroleum products (down 7.0%) decreased.

Shipments increased at a faster pace year-on-year from 15.5 percent to 26.2 percent, while

the level of inventory decelerated a drop from the previous months 14.3 percent to 7.5

percent.

By business category, the shipments of semiconductors and parts (up 82.1%) and

automobiles (up 46.5%) rose year-on-year, while those of transportation equipment (down

6.5% ) and refined petroleum products (down 3.9% ) declined. The inventories of

semiconductors and parts (up 12.3%) and refined petroleum products (up 8.5%) increased

while those of apparels (down 29.9%) and primary metals (down 16.7%) went down.

The average operation ratio of the manufacturing sector landed at 79.9 percent,

approaching the usual level of 80 percent.

Mining and manufacturing production in January is projected to show limited improvement

month-on-month due to a reduction in the number of working days, despite an increase in

production backed by rising exports and inventory adjustment.

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

(y-o-y)

- Manufacturing

Heavy chemical industry

Light industry

Shipment

- Domestic demand

- Exports

Inventory3

Average operation ratio (%)

Production capacity

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



Mining andmanufacturingactivity2

Manufacturingactivity

20092008

Annual

-

3.0

3.0

4.1

-2.2

2.4

-0.7

7.1

7.3

77.2

5.2

Q4

-11.9

-11.3

-12.1

-12.8

-8.8

-10.1

-11.0

-8.8

7.3

69.3

3.5

Dec

-9.6

-18.7

-20.0

-21.8

-10.8

-15.5

-14.9

-16.3

7.3

62.3

3.4

Annual1

-

-0.7

-0.9

0.0

-5.5

-1.7

-2.3

-0.8

-7.5

74.1

2.8

Q3

7.2

4.2

4.4

5.6

-1.8

2.1

3.1

0.8

-13.9

78.9

2.8

Q4

1.4

16.1

16.8

19.9

2.3

12.8

12.2

13.7

-7.5

78.2

3.6

Oct

-3.8

0.3

0.5

2.0

-7.1

-0.6

-1.0

-0.1

-16.1

77.3

3.4

Nov1

1.5

17.9

18.7

21.7

4.1

15.5

13.8

17.8

-14.3

77.3

3.5

Dec1

3.5

33.9

35.9

41.3

11.7

26.2

25.8

26.7

-7.5

79.9

3.9

Industrial electricity sales (thousand GWh)

18.3 (Sep 2009) 17.7 (Oct) 18.1 (Nov) 19.1 (Dec) 19.2 (Jan 2010)1

Export increase (%)

-20.9 (Aug 2009) -9.4 (Sep) -8.5 (Oct) 17.9 (Nov) 32.8 (Dec) 47.1 (Jan 2010)

1. Estimate


22/73


Average manufacturing operation ratio


6-1

6-2

6-3



Inventory



23/73

22 February 2010

7. Service sector activity

Service activity in December 2009 reversed its course to increase 1.8 percent month-on-

month after decreasing for two consecutive months since October. From a year earlier,

service output expanded 5.3 percent.

By business category, real estate & renting services (up 12.2%), healthcare & social welfare

services (up 11.6%) and wholesale & retail sales (up 8.1% ) led the year-on-year increase in

service activity. On the other hand, educational services declined 2.1 percent from a year

earlier.

Considering credit card spending and the volume of stock transactions, service activity in

January 2010 is expected to hold steady although leisure services are likely to contract due

to heavy snow and cold weather.


Annual Q4 Annual Q1 Q2 Q3 Q4 Oct Nov1 Dec1

Service activity index

- Wholesale & retail

- Transportation services

- Hotels & restaurants

- Information & communication services

- Financial & insurance services

- Real estate & renting

- Professional, scientific & technical services

- Business services

- Educational services

- Healthcare & social welfare services

- Entertainment, cultural & sports services

- Membership organizations

- Sewerage & waste management

Weight2008 2009

100

22.0

9.0

7.8

8.4

15.3

6.3

4.8

2.9

10.8

6.0

2.9

3.8

0.4

3.4

1.4

4.3

0.7

3.5

9.7

-2.1

2.0

4.6

1.8

6.3

2.2

0.1

5.8

-0.4

-4.6

-3.2

-3.0

-0.2

4.5

-7.5

0.9

0.1

2.3

6.5

4.3

-1.0

4.0

1.7

-0.2

-5.7

-1.2

0.4

7.5

5.3

0.6

-2.9

1.1

9.6

-0.5

-2.4

3.6

-0.4

-4.0

-10.8

-2.4

-1.9

6.6

-3.1

-1.9

-4.8

3.7

8.6

1.5

-3.4

0.5

1.6

-2.2

-9.5

-0.3

0.9

9.8

1.5

3.2

-6.6

6.9

8.1

0.9

-5.0

8.8

2.2

0.3

-4.1

-2.2

1.5

8.7

9.3

0.1

-1.1

-2.6

9.8

0.1

-1.7

5.5

3.3

5.1

1.8

-0.2

1.0

4.9

14.0

0.8

0.5

-3.3

11.6

-3.8

0.1

-0.2

5.3

8.1

5.4

3.7

0.1

5.9

12.2

5.8

1.5

-2.1

11.6

2.3

3.2

0.0

1.3

1.9

-2.1

-2.7

1.5

4.0

14.3

-3.0

0.4

-7.5

11.5

-6.6

-0.6

-3.4

3.5

5.4

2.4

-2.0

1.5

4.8

15.8

-2.4

-0.4

0.1

11.7

-6.6

-2.6

2.7

1. Preliminary


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)

Volume of stock transactions (trillion won)



24/73


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



25/73

24 February 2010

8. Employment

The number of workers on payroll in December 2009 declined by 16,000 from a year earlier,

while the employment rate fell by 0.8 percentage points to 57.6 percent.

Employment in manufacturing (down 16,000), construction (down 58,000), and agriculture,forestry & fishery (down 169,000) stayed on a downward track, while hiring in the service

sector (up 228,000) surged driven by the governments job creation policies. Manufacturing

employment slowed the pace of decline. The continued fall in construction employment was

attributed to the sluggish private sector construction, while employment slump in

agriculture, forestry & fishery was mainly due to decreased autumn cultivation and a drop in

temperature.

Wage workers rose by 366,000 led by an increase of 564,000 in regular workers, although

the number of daily workers plunged by 191,000. Non-wage workers including self-employed

workers, however, plummeted by 382,000 from a year earlier. In the mean time, female

workers (down 142,000) and workers aged 30 to 39 (down 131,000) saw a sharp decrease.

Number of employed (million)

Employment rate (%)

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

20092008

Annual

23.58

59.5

145

182

-52

-37

263

-37

236

386

-93

-57

-92

-79

96

48

-119

-26

64

207

18

Q1

23.05

58.5

209

272

-18

-22

307

-63

312

435

-98

-25

-102

-79

133

76

-107

-4

52

254

15

Q2

23.87

60.4

173

227

-34

-46

300

-54

289

448

-96

-63

-115

-67

117

56

-87

29

56

199

-24

Q3

23.75

59.9

141

179

-52

-40

262

-38

208

347

-83

-56

-66

-76

92

49

-114

-36

92

169

30

Q4

23.64

59.4

54

46

-103

-41

187

8

137

316

-94

-85

-83

-95

43

12

-166

-92

56

206

50

Dec

23.25

58.4

-12

-16

-133

-48

162

4

86

318

-94

-138

-97

-93

4

-16

-155

-109

46

185

22

Annual

23.51

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

-146

-160

-163

-43

47

14

73

318

-136

-108

-220

-197

-23

-124

-212

-159

8

193

23

Q2

23.74

59.3

-134

-109

-151

-113

155

-25

175

313

-5

-133

-309

-286

24

-158

-99

-213

-27

156

49

Q3

23.75

59.1

-1

24

-143

-103

269

-25

356

386

125

-155

-357

-276

34

-34

-123

-169

-30

211

109

Q4

23.63

58.7

-6

110

-49

-107

264

-116

413

492

186

-264

-424

-307

89

-94

-77

-149

-46

230

37

Dec

23.23

57.6

-16

153

-16

-58

228

-169

366

564

-8

-191

-382

-265

126

-142

-12

-131

-68

242

-47



26/73


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



27/73

26 February 2010

The number of the unemployed in December 2009 climbed by 47,000 year-on-year to record

834,000, and the unemployment rate rose by 0.2 percentage points to 3.5 percent.

Contrary to the general trend, unemployment for women (up 51,000) grew at a faster pace

than for men in December.

The unemployment rate was high among youths aged 15 to 29 and high school graduates.

However, their unemployment rates were nearly unchanged or edged down from a year

earlier in December.

The economically inactive population in December was up 481,000 from a year earlier to

post 16,250,000 led by workers quit jobs due to family duties (up 313,000) and retirement(up 98,000) as well as workers stayed away from work to take a rest (up 107,000).

Meanwhile, the labor force participation rate was down 0.7 percentage points year-on-year

to 59.7 percent.

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

20092008

Annual

769

-14

-12

-1

3.2

3.2

7.2

2.2

3.8

3.0

Q1

801

-50

-43

-7

3.4

3.1

7.3

2.5

4.0

3.1

Q2

767

-24

-32

9

3.1

3.2

7.4

2.2

3.7

3.1

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

Dec

787

51

51

0

3.3

3.3

7.6

2.5

4.2

2.7

Annual

889

119

80

40

3.6

3.6

8.1

2.5

4.4

3.5

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

Dec

834

47

-4

51

3.5

3.5

7.6

2.9

4.1

3.1


Economically inactive population (million)

Participation rate (%)

Growth in economically inactive

population (y-o-y, thousand)

- Engaged in family duties

- Retired

- Rest

20092008

Annual

15.25

61.5

297

123

76

31

Q1

15.58

60.5

270

122

42

36

Q2

14.90

62.3

256

127

100

14

Q3

15.15

61.8

289

134

104

-27

Q4

15.37

61.3

372

112

59

99

Dec

15.77

60.4

424

88

76

162

Annual

15.70

60.6

447

188

88

123

Q1

16.09

59.7

514

209

52

162

Q2

15.35

61.7

445

173

102

112

Q3

15.53

61.3

374

119

105

94

Q4

15.83

60.7

456

250

92

123

Dec

16.25

59.7

481

313

98

107



28/73


Unemployment rate and youth unemployment rate


8-4

8-5

8-6 Unemployment rate by education


Employment rate



29/73

28 February 2010

9. Financial market

9.1 Stock market

The Korean stock market in January 2010 plunged in line with a fall in global stock markets.Global investor sentiment has been chilled as the Bank of China raised the bank reserve

ratio by half a percentage point on January 18 and the Obama administration proposed

financial reform regulations on January 21.

Persisting worries over a burgeoning debt crisis of European countries such as Greece and

Spain contracted investment into emerging markets of Europe as well as Asia.

Although the domestic stock market was lifted by the so-called January effect at the

beginning of the year, the market thereafter fell driven by foreign investors who have

continued their net-selling of Korean shares since China raised the reserve requirement ratio

for its banks.

9.2 Exchange rate

The won/dollar exchange rate as of the end of January 2010 fell 2.7 won from 1,164.5 won at

the end of December to wrap up the month at 1,161.8 won.

The exchange rate dropped to 1,119 won, the lowest this year, on January 11 as the won

gained strength with financial soundness and a bright outlook for economic growth. It,

thereafter, shifted to a rise as investors appetite for safe assets grew due to US President

Obamas proposal to strengthen regulations on banks, concerns over Chinas tightening and

credit risks in the eurozone.

The won/yen exchange rate rose to the 1,290 won range as uncertainties in the international

financial markets boosted demand for safe assets including the yen.

Dec 2009 Jan 2010 Change1 Dec 2009 Jan 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 Change1

Won/Dollar 929.8 936.1 1,259.5 1,164.5 1,161.8 0.2

Won/100Yen 783.4 828.6 1,396.8 1,264.5 1,293.2 -2.2

2006 2007 2008 2009 2010

KOSPI KOSDAQ

(End-period, point, trillion won)

1,682.8

887.3

4.7

32.7

1,602.4

848.1

6.2

32.5

-80.4(-4.8%)

-39.2(-4.4%)

1.5(32.2%)

-0.2(-0.6%)

513.1

85.2

2.0

7.8

496.6

84.6

3.2

7.6

16.5(3.2%)

-0.6(-0.7%)

1.2(62.3%)

-0.2(-2.6%)


30/73


9-1

9-2

9-3 Recent foreign exchange rate

Foreign exchange rate (month-end)

Stock prices


31/73

30 February 2010

9.3 Bond market

Treasury bond yields were down in January 2010 due to the Bank of Koreas policy rate

freeze, growing demand for safe assets amid the bearish stock market and slowed GDP

growth in the fourth quarter of 2009. Foreign investors continued their net-selling of KTB

futures, accelerating the fall in the yields.

9.4 Money supply & money market

The M2 (monthly average) in November 2009 expanded 9.1 percent from a year earlier

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

The year-on-year M2 growth was lower than the previous months 9.9 percent, due to

reduced inflow of foreign funds into securities and a high base effect. The M2 increased 12

trillion won in November 2009, while it swelled 22 trillion won along with fiscal expansion in

November 2008.

In December 2009, bank deposits turned to a decrease as increased demand for money at

year-end fueled withdrawals, and banks stepped up efforts to reduce the amount of CDsunder stiffer regulations on the loan to deposit ratio.

Asset management company (AMC) deposits plummeted as withdrawals of funds expanded

due to efforts at year-end to lower debt ratios by businesses as well as to improve BIS ratios

by banks.

Dec Dec Dec Dec Nov Dec Jan Change1

Call rate (1 day) 3.76 4.60 5.02 3.02 2.01 2.01 2.00 -1

CD (91 days) 4.09 4.86 5.82 3.93 2.79 2.88 2.88 0

Treasury bonds (3 yrs) 5.08 4.92 5.74 3.41 4.10 4.44 4.27 -17

Corporate bonds (3 yrs) 5.52 5.29 6.77 7.72 5.21 5.56 5.39 -17

Treasury bonds (5 yrs) 5.36 5.00 5.78 3.77 4.61 4.98 4.82 -16

(End-period, %)

1. Basis point changes in January 2010 from the previous month

2009 20102008200720062005

Bank deposits

AMC deposits

(Monthly change, end-period, trillion won)

1. Balance at end December 2009, trillion won

2007 2008 2009

Annual

59.6

61.8

Dec

-3.6

-0.4

Annual

104.3

63.0

Dec

-8.2

12.8

Oct

-6.8

-7.3

Nov

1.5

4.4

Dec

-8.3

-11.1

Dec1

1,008

332

M1+2

M2

Lf3

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

1. Balance at end November 2009, trillion won

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

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

4. Balance at end October 2009, trillion won

2009

Annual

-5.2

11.2

10.2

2007 2008

Annual

-1.8

14.3

11.9

Q1

-12.4

13.3

11.6

Q4

5.0

13.8

11.2

Q2

-0.1

15.3

12.8

Q3

2.1

14.7

12.1

Nov

5.5

14.0

11.4

Q1

10.8

11.5

8.8

Q2

17.6

10.1

7.3

Q3

18.9

9.5

7.5

Nov

17.3

9.1

Around 7

Nov1

371

1,556

1,9824

Oct

19.6

9.9

7.4


32/73


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.


33/73

32 February 2010

10. Balance of payments

Koreas current account recorded a US$1.52 billion surplus in December 2009.

The goods account has continued to post a surplus for eleven consecutive months since

February 2009 on the back of trade surpluses. The goods account surplus, however, shrank

to US$4.02 billion from US$5.84 billion a month earlier.

The service account deficit surged to US$2.80 billion from the previous months US$1.66

billion, as deficits swelled in the travel and business service accounts due to seasonal

factors.

The income account surplus expanded to US$700 million from US$390 million of the

previous month mainly due to increased dividend income.

The current transfer account deficit was up to US$400 million from the previous monthsUS$290 million with increased outward remittance.

The capital and financial account in December posted a net inflow of US$1.64 billion.

The direct investment account reduced the net outflow to register US$1.37 billion from the

previous months deficit of US$2.84 billion as outbound foreign direct investment (FDI) by

locals was down.

The portfolio investment account decreased the net inflow to record US$970 million from

US$3.39 billion a month earlier as foreign investment in the Korean bond market declined.

The financial derivatives account expanded the net inflow to post US$990 million from

US$850 million in the previous month as payments related to overseas financial derivative

transactions decreased.

The other investment account increased the surplus to US$1.01 billion from the previous

months US$190 million as the net inflow of trade credits was up.

The current account is likely to shift to a deficit in January 2010 as the trade balance turnedto a deficit of US$470 million and the service account deteriorated due to seasonal factors.

Capital & financial account balance (US$ billion)

-1.40 (Q1 2009) 8.68 (Q2) 14.40 (Q3) 4.77 (Q4); 1.54 (Nov) 1.64 (Dec)

Current account

- Goods balance

- Service balance

- Income balance

- Current transfers

(US$ billion)

20092008

Annual

-5.78

5.67

-16.67

5.90

-0.67

Q1

-4.87

-1.38

-4.94

1.98

-0.53

Q2

-0.41

5.53

-4.46

-0.52

-0.96

Q3

-8.33

-3.23

-5.84

1.50

-0.76

Q4

7.83

4.75

-1.44

2.94

1.58

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



34/73


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


35/73

34 February 2010

11. Prices and international commodity prices

11.1 Prices

Consumer prices in January 2010 increased 0.4 percent month-on-month while rising 3.1percent year-on-year.

Core consumer prices, which exclude the prices of oil and agricultural products, rose by 2.1percent year-on-year. Consumer prices for basic necessities, a barometer of perceivedconsumer prices, were up 3.8 percent compared to the same month of the previous year.

The year-on-year inflation temporarily exceeded 3 percent due to the low base effectfollowing the last years weak oil product prices.

Prices of Dubai crude (US$/barrel)44.1 (Jan 2009) 76.8 (Jan 2010)

Prices of agricultural, livestock and fishery products gained strength due to seasonal factorsincluding cold wave and heavy snowfall.

Prices of agricultural, livestock & fishery products in January 2010 (m-o-m, %)Rice (0.3), radish (9.0), Chinese cabbage (31.5), cucumber (-7.5), lettuce (39.5), mandarin orange (10.1), Korean

beef (-0.2), pork (-3.2), mackerel (0.4), scabbard fish (4.8), Alaska pollack (3.1)

Prices of oil products increased 1.6 percent from a month earlier affected by higherinternational oil prices and increased LPG supply prices in early January.

Prices of oil products in January 2010 (m-o-m, %)Gasoline (1.0), diesel (0.7), kerosene (1.5), LPG for automobiles (6.1), LPG for kitchen use (5.7)

Public utility charges rose 0.4 percent month-on-month as administrative charges increasedand fees for medical treatment climbed due to adjustments by National Health Insurance

Corporation at the beginning of the year. Personal service charges were up 0.2 percent fromthe previous month due to price adjustments of some personal services at the beginning of theyear and increasing fuel surcharge by airliners.

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

3.1

3.07

2.6

0.22

2.4

0.21

0.1

0.03

5.4

1.66

1.6

0.09

18.4

0.94

0.1

0.01

1.2

0.11

0.4

0.07

1.9

0.31

0.2

0.06

2.2

0.78Source: Statistics Korea

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)

Jan

0.1

3.7

5.2

0.2

2.8

Feb

0.7

4.1

5.2

0.4

3.3

Mar

0.7

3.9

4.5

0.4

3.1

Apr

0.3

3.6

4.2

0.2

3.0

May

0.0

2.7

3.9

0.2

1.8

Jun

-0.1

2.0

3.5

0.1

0.5

Jul

0.4

1.6

3.2

0.2

0.4

Aug

0.4

2.2

3.1

0.1

1.3

Sep

0.1

2.2

2.7

0.1

1.7

Oct

-0.3

2.0

2.6

0.1

1.5

Nov

0.2

2.4

2.5

0.2

2.3

Dec

0.4

2.8

2.2

0.1

3.3

Jan

0.4

3.1

2.1

0.1

3.8

2010


36/73


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)


37/73

36 February 2010

11.2. International oil and commodity prices

Before turning to a decrease after mid-January amid Chinas tightening policy and a strong

dollar led by concerns over credit squeeze in some European countries including Greece,

international oil prices rose as heating demand was boosted by abnormally cold weather and

heavy snow.

Despite the wons appreciation, domestic prices of international oil products inched up

month-on-month as higher international oil product prices were reflected with the timg lag.

Prices of non-ferrous metals in January rose despite a strong dollar while international prices

of grain fell due to weak fundamental factors.

Monthly average prices of non-ferrous metals increased month-on-month before turning to a

decrease after mid-January as China, the worlds largest consumer of raw materials,

announced monetary policy tightening.

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

month due to a strong dollar, bullish harvest expectation for 2009-2010, and increased

stockpile.

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

Corn (-4.1), wheat (-3.6), soybean (-5.2), bronze (5.6), aluminum (2.4), nickel (7.8), zinc (1.8), lead (1.5), tin (13.8)

(Won/liter, period average)

Annual Annual Annual Jul Aug Sep Oct Nov Dec Jan

Gasoline prices 1,526 1,692 1,601 1,639 1,670 1,681 1,627 1,655 1,646 1,661

Diesel prices 1,273 1,614 1,397 1,428 1,447 1,453 1,409 1,452 1,441 1,450

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), WTI crude: 146 (Jul 14)

(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

Jul

65.0

64.6

64.2

Aug

71.4

72.9

71.1

Sep

67.7

67.5

69.4

Oct

73.2

72.8

75.8

Nov

77.7

76.7

78.1

Dec

75.5

74.5

74.5

Jan

76.8

76.4

78.3

Source: KOREAPDS

(Period average)Reuters index*

Annual Annual Annual Jul Aug Sep Oct Nov Dec Jan

2,400 2,536 2,079 2,082 2,159 2,147 2,197 2,243 2,294 2,343

2009 201020082007

* A weighted average index of 17 major commoditiesSource: KOREAPDS

Reuters index*


38/73


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


39/73

38 February 2010

12. Real estate market

12.1 Housing market

In January 2010, nationwide apartment sales prices inched up mere 0.1 percent month-on-

month, decelerating the pace of increase for four straight months.

Despite an upward trend in Gangnam (up 0.2% ) spurred by development projects,apartment sales prices in the Seoul metropolitan area remained stable as those in Gyeonggiprovince (down 0.1%) continue to fall due to increasing supply of newly built apartments.

On the other hand, apartment sales prices in other cities, especially Busan (up 0.6% ) andDaejeon (up 0.6%), increased relatively significantly amid supply shortage.

The rental prices have moderately accelerated the growth pace by rising 0.4 percent fromthe previous month. The rental prices in Gangnam (up 1.9%), Seocho (up 1.7%), and Songpa(up 0.9%) significantly increased due to rising house demand in good school districts during

school vacation.

Apartment sales transactions in December slightly increased from 81,589 a month earlier topost 81,961. The transactions were up 43.1 percent from a year earlier and down 1.6 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

2006 2007 2008 2009

Annual

94

Dec

117

Annual

84

Dec

76

Annual

74

Dec

57

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

(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

Nov

0.3

0.0

0.0

0.1

0.0

0.8

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

Jan41

0.03

0.02

0.04

0.00

0.00

0.07

Jan111

0.06

0.05

0.09

0.01

0.01

0.14

Jan181

0.06

0.03

0.05

0.00

0.01

0.13

Jan251

0.08

0.09

0.14

0.03

0.03

0.17

(Percentage change from previous period)Nationwide apartment rental prices

Nationwide

Seoul

Gangnam2

Gangbuk3

Seoul metropolitan area

5 metropolitan cities1. 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

Nov

0.8

0.8

1.0

0.6

0.7

1.1

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

Jan41

0.09

0.13

0.20

0.04

0.05

0.18

Jan111

0.13

0.19

0.29

0.07

0.10

0.23

Jan181

0.13

0.22

0.29

0.13

0.10

0.22

Jan251

0.19

0.26

0.35

0.14

0.15

0.30


40/73


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


41/73

40 February 2010

12.2 Land market

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

December rose 0.34 percent, slightly accelerating from the previous month.

Land prices in Seoul metropolitan area (up 0.38% ) continued to rise faster than the

nationwide average prices (up 0.34% ). In particular, Incheon and Gyeonggi province

continued to post high price increases rising by 0.63 percent and 0.46 percent, respectively.

In addition, price increases in areas excluding the Seoul metropolitan area, especially North

Gyeongsang province (up 0.43%) and Daegu (up 0.40%), accelerated the growth pace, rising

by 0.26 percent.

Nationwide land transactions in December expanded 48.9 percent from a year earlier to

241,000 land lots. For the full year of 2009, land transactions were down 2.7 percent year-

on-year.

Nationwide land transactions excluding Daegu (down 4.2% ) increased year-on-year.

Particularly, land transactions in Gyeonggi province (up 85.5%), South Chungcheong

province (up 71.7%) and Busan (up 71.3%) soared.

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

0.41 (Sep 2009) 0.37 (Oct) 0.36 (Nov) 0.38 (Dec)

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

0.12 (Sep 2009) 0.16 (Oct) 0.21 (Nov) 0.26 (Dec)

(Percentage change from previous period)Land prices by region

Nationwide

Seoul

GyeonggiIncheon

2007 2008 2009

Annual

3.88

5.88

4.224.86

Q3

0.91

1.40

1.051.12

Q4

1.15

1.90

1.141.13

Annual

-0.31

-1.00

-0.261.37

Q1

1.23

1.83

1.281.36

Q2

1.46

2.17

1.571.67

Q3

1.18

1.59

1.282.01

Q4

-4.08

-6.34

-4.28-3.57

Annual

0.96

1.40

1.221.99

Q1

-1.20

-1.38

-1.62-1.39

Q2

0.35

0.68

0.370.53

Q3

0.88

1.30

1.131.16

Oct

0.30

0.30

0.420.51

Nov

0.30

0.24

0.470.55

Dec

0.34

0.27

0.460.63


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

Nationwide

Seoul

Gyeonggi

Incheon

2007 2008 2009

Annual

208

33

49

13

Annual

208

26

45

13

Dec

162

13

31

8

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

Dec

241

21

58

12

Oct

212

25

52

14

Nov

207

19

48

11



42/73


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)


43/73

42 February 2010

13. Composite indices of business cycle indicators

The cyclical indicator of coincident composite index was down 0.3 points in December, 2009.

Three out of all components of the index including the service activity index decreased.

Meanwhile, the wholesale & retail sales index, the domestic shipment index, and the mining

& manufacturing production index were up.

The 12-month smoothed change in leading composite index increased 0.2 percentage points

month-on-month, running on an upward track since January 2009.

The indicator of inventory cycle, the volume of capital goods imports, the ratio of job

openings to job seekers and the liquidity in the financial institutions were up.

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

Wholesale & retail sales index (0.6%), domestic shipment index (0.5%), mining & manufacturing production

index (0.3%), volume of imports (0.3%), number of non-farm payroll employment (0.0%), manufacturing

operation ratio index (-0.2%), value of construction completed (-0.3%), service activity index (-0.4%)

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

Indicator of inventory cycle (5.6%p), volume of capital goods imports (1.3%), ratio of job openings to job

seekers (0.6%p), liquidity in the financial institutions (0.1%), net terms of trade index (0.0%), spreads between

long & short term interest rates (-0.1%p), consumer expectations index (-0.2%p), value of construction

orders received (-0.3%), composite stock price index (-0.6%), value of machinery orders received (-1.1%)

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

Cyclical indicator of coincident composite index

(m-o-m, p)

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

12 month smoothed changein leading composite index (%)

(m-o-m, %p)

1. Preliminary

2009

1. Preliminary

Jul

1.2

96.2

0.8

1.4

7.8

2.0

Aug

0.9

96.7

0.5

1.0

9.1

1.3

Sep

0.6

96.9

0.2

0.7

10.1

1.0

Oct

0.4

96.9

0.0

1.1

11.3

1.2

Nov1

0.4

96.9

0.0

1.4

12.6

1.3

Dec1

0.2

96.6

-0.3

0.6

12.8

0.2


44/73


Coincident and leading composite indices


13-1

13-2

13-3

Cyclical indicator of coincident composite index


Leading composite index



45/73

44 February 2010

Background

The employment situation in 2009 did not keep up with the economic recovery, partly due tothe late refection of economic conditions on employment. However, this caused the real

economic sentiment of the Korean people to remain low, making sustainable economic

rebound arguable. Against this backdrop, the Korean government put the first policy priority

in 2010 on job creation, focusing both on short-term measures to create jobs and long-term

measures to transform the economy into a more employment-friendly one. The National

Strategy Meeting on Employment, which will be held every month until the end of 2010, will

serve as a center where all governmental ability convenes to improve the employment

situation.

The National Strategy Meeting on Employment

The National Strategy Meeting on Employment, presided over by the president and

participated in by those from related ministries, government agencies, political parties,

Cheong Wa Dae (office of the president) and the private sector, deals with a wide range of

job creating policies from laying out job creating measures, to finding ways to most

effectively implement the measures, and to how to assess the effect of such measures. The

meeting is supported by three task force teams, each of which is in charge of 1) creating jobs

in the public sector and improving labor markets, 2) developing the service sector and

promoting investment, and 3) job training and education. The pool of experts from the

private sector serves as a policy consulting committee.

Key policies

Short-terms measures, which will be adopted for a limited period of time, focus on

motivating employment through financial incentives including tax breaks, while mid- and

long- term measures on a paradigm shift of the countrys economy to achieve economicgrowth with job creation.

The National Strategy Meeting on Employment &Job Creating Policies

Policy Issues


46/73


To help create jobs in a sustainable manner, the government will reform existing regulations

to become more employment-friendly, and push toward deregulating service industries, as

they are expected to create more jobs than other industries. The reform will also be directed

to upgrade the labor market to be more flexible and secure, and to raise quality workers by

providing right training and education.

Short-term measures

Short-terms measures involve 1) linking job seekers and companies with job openings, 2)

running programs which facilitate employment such as job brokering, training, and start-up

consulting, and 3) providing financial incentives.

To link small-and medium-sized enterprises (SMEs) suffering workforce shortages with job

seekers, the government will expand Work-net, the state-run job portal, to cover information

on job seekers in addition to information on college and professional high school graduates

currently available. The number of job openings accessible through the portals data base is

expected to increase from 30,000 to 100,000.

To meet the needs of those seeking different kinds of employment, the government will run

three kinds of programs: 1) Those who want to be employed at present will access job

opening information by private job agencies more easily, as the government will increase the

number of private job agencies with the state certification, support setting up a computer

network between public and private job agencies, and offer financial incentives to private

agencies when they link job seekers and job positions through the network. 2) For those

who want job training, the government planned to support education fees and living

expenses, the latter of which will be loaned from Korea Workers Compensation & Welfare

Service at a low rate. Private institutions will be main trainers, and trainees will receive the

education fee support of up to 2 million won a year. 3) Those who want to start businesses

are eligible for consulting services as well as financial support. One trillion won of venture

fund will be established in 2010 to finance promising venture enterprises.

Governments financial incentives to promote employment include incentives given to thosegetting jobs in SMEs through the state-run data base, 50 percent of six month salaries of

those newly employed without college education given to companies if they recruit them as

trainees, and 50 percent of one year salaries of those newly employed with higher than

masters degrees in science and engineering given to venture companies.

Tax deduction will be offered to SMEs employing more workers than the previous year,

which will be effective until the first half of 2011 and also available for new enterprises.

SMEs increasing total number of employees will have a higher priority in governments

financial support. Public institutions will be allowed to recruit part time.


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The government will continue its efforts to create jobs in the public sector with projects such

as housing construction for low income brackets and the four river restoration project. Job

creating measures such as Hope Employment Program will be implemented in the first half.

Mid-and long-term measures

For the Korean economy to create jobs in a sustainable manner, the government will pursue

developing industries with higher job creating potential, upgrading services markets,

developing quality work force needed by businesses, and reforming labor markets.

Industries with higher job creating potential, in particular parts manufacturing and skill-

intensive industries, will receive more financial support from the government. Regulations

on establishing enterprises will be eased, along with the ban on location being lifted. The

Korean government will nurture SMEs and help them develop into strong enterprises, as th

Documents

Economic Bulletin (Vol.32 No.2)