Economic Bulletin (Vol.32 No.4, April 2010)

8/9/2019 Economic Bulletin (Vol.32 No.4, April 2010)

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The Green Book: Current Economic Trends

Overview 3

1. Global economy 4

2. Private consumption 8

3. Facility investment 12

4. Construction investment 14

5. Exports and imports 16

6. Mining and manufacturing production 18

7. Service sector activity 20

8. Employment 22

9. Financial markets 26

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

10. Balance of payments 30

11. Prices and international commodity prices 32

11.1 Prices11.2 International oil and commodity prices

12. Real estate market 36

12.1 Housing market12.2 Land market

13. Composite indices of business cycle indicators 40

Policy IssuesNew national accounting system to take hold in three years 42

Economic News Briefing 45

Statistical Appendices 51

Republic of Korea

Economic Bulletin

Vol. 32 | No. 4


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Economic Bulletin 3

The Korean economy continued a recovery track, as major economic indicators such asproduction, domestic demand, exports, and employment showed steady improvement amidstabilizing prices.

Mining and manufacturing production in February rose 3.6 percent month-on-month and19.1 percent year-on-year, thanks to robust exports and domestic demand. Service outputimproved 3.1 percent month-on-month and 7.1 percent year-on-year in line with an increasein educational services and information & communication services.

Consumer goods sales increased 1.8 percent month-on-month and 12.9 percent year-on-yearin February, as the lunar new year holidays and corporate incentive payment positivelyaffected sales of durable and non-durable goods.

In February facilities investment, led by machinery investment, grew both month-on-monthand year-on-year by 7.8 percent and 18.0 percent, respectively. Construction completed fellboth month-on-month and year-on-year by 3.9 percent and 2.4 percent, respectively, due to

poor performance in building construction and civil engineering works.

The total number of workers hired in February gained 125,000 year-on-year, led by anemployment increase in the manufacturing and service sectors. The employment rate( seasonally adjusted ) posted 58.3 percent, adding 0.1 percentage point month-on-month,while the unemployment rate (seasonally adjusted) landed at 4.4 percent, shedding 0.4percentage points.

Exports jumped 35.1 percent year-on-year in March, helped by the recovering globaleconomy. Imports, backed by a hike in raw materials and capital goods, soared 48.4 percentyear-on-year.

The consumer price increase in March stabilized at 2.3 percent, as manufactured goodsprices and service fees remained steady while prices of petroleum, agriculture, livestock andfishery products went up.

In March, the financial market saw stock prices increase and foreign exchange rates fall,backed by foreign investors net buying of domestic stocks amid easing concerns over theGreek fiscal crisis and rising expectations of global economic recovery.

To sum up, although the Korean economy stays on an upward track amid the globaleconomy steadily recovering, external uncertainties still exist from fiscal difficulties in someEuropean countries, discord between the US and China over trade imbalance, and risingprices of raw materials including oil and steel.

The Korean government, to achieve a secure economic recovery, will hold on to currentpolicies, while renewing its efforts to create jobs and support the working class. On the other

hand, the government will examine more closely any possible risks at home and abroad, andsteadily work towards improving Koreas economic structure, with on-going corporaterestructuring among others.

The Green BookCurrent Economic Trends

Overview


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4 April 2010

1. Global economy

The global economy has been recovering moderately, as consumption, production, and

employment improved in the US, China, and Asian developing countries. However, recovery

of the eurozone economy is still slow, due to growing concerns about Europes fiscal deficit

amid Portugals sovereign credit rating cut on March 24 and Icelands on March 31.

US real GDP grew 5.6 percent (annualized q-o-q, final ) in the fourth quarter of 2009, while

consumption and employment increased from the beginning of 2010. The economic recovery

clearly took hold as industrial production and retail sales expanded in February from the

previous month and the ISM manufacturing index hit a six-year high of 59.6.

The US housing market was negatively affected in February by the cold wave and the Feds

MBS (Mortgage-Backed Security) purchase expiration on March 31, as existing and new

home sales fell month-on-month by 0.6 percent and 2.2 percent, respectively.

Job markets improved in March, as the unemployment rate stayed flat at 9.7 percent and

non-farm payroll increase reached an all-time high of 162,000 since March 2007.

The Federal Reserve announced in the Federal Open Market Committee (FOMC) on March 16

that the Fed would maintain the target range for the federal funds rate at zero to 0.25percent, and close all the remaining special liquidity facilities, excluding TALF (Term Asset-

Backed Securities Loan Facility) scheduled to end on June 30.

US

(Percentage change from previous period)

Annual Q3 Annual Q1 Q2 Q3 Q4 Jan Feb

Real GDP1

- Personal consumption expenditure

- Corporate fixed investment

- Construction investment for housing

Industrial production

Retail sales

New home sales

New non-farm payroll employment(thousand) 2

Consumer prices (y-o-y, %)

2008 2009 2010

1. Annualized rate (%)

2. Monthly average

Source: US Department of Commerce

0.4

-0.2

1.6

-22.9

-1.8

-0.8

-37.4

-302

3.8

-5.4

-3.1

-19.5

-23.2

-3.4

-6.8

-15.0

-652

1.5

-2.4

-0.6

-17.9

-20.4

-9.8

-6.0

-22.8

-395

-0.3

-6.4

0.6

-39.2

-38.2

-5.2

-1.3

-13.5

-753

-0.2

-0.7

-0.9

-9.6

-23.3

-2.7

-0.1

9.9

-477

-0.9

2.2

2.8

-5.9

18.9

1.6

1.6

9.2

-261

-1.6

5.6

1.6

5.3

3.8

1.6

1.8

-8.9

-90

1.5

-

-

-

-

0.9

0.1

-8.7

14

2.6

-

-

-

-

0.1

0.3

-2.2

-14

2.1

Unemployment rate (%)

10.1 (Oct 2009) 10.0 (Nov) 10.0 (Dec) 9.7 (Jan 2010) 9.7 (Feb) 9.7 (Mar)


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Economic Bulletin 5

US federal funds rate and consumer prices

Source: US Federal Reserve Board & Department of Labor

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

Source: US Department of Labor

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

Source: US Department of Commerce1-1

1-2

1-3


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6 April 2010

As the Chinese economy saw domestic demand continue to increase and exports growsubstantially, the consequent increase in liquidity fueled concerns about hikes in real estateand consumer prices. The Chinese government announced in the National PeoplesCongress on March 5 that it would maintain its proactive fiscal policy and moderately easymonetary policy, thereby expanding domestic demand.

Japans economy grew 0.9 percent quarter-on-quarter in the fourth quarter of 2009, stayingon a slightly upward track, as exports and domestic consumption improved. Theunemployment rate remained unchanged at 4.9 percent in February, showing signs ofstabilizing job markets, while consumer prices continued to decline.

Eurozones economic recovery was delayed by continuing low employment which reached

10.0 percent in February, amid uncertainties still existing including Portugals sovereigncredit rating cut. Greece sovereign debt concerns were relieved to some extent, as Europeanleaders agreed to provide a joint Europe-IMF bailout to Greece at the EU summit held onMarch 25-26.

China

Japan

(Percentage change from same period in previous year)

Real GDP

Fixed asset investment (accumulated)

Retail sales


Exports

Consumer prices

Producer prices

2008 2009 2010

Annual

9.0

26.1

21.6

12.9

17.2

5.9

6.9

Q4

6.8

26.1

20.6

6.4

4.1

2.5

2.5

Annual

8.7

30.5

15.5

11.0

-15.9

-0.7

-5.4

Q1

6.2

28.6

14.9

5.1

-19.7

-0.6

-4.6

Q2

7.9

33.6

15.0

9.2

-23.5

-1.5

-7.2

Q3

9.1

33.3

15.4

12.4

-20.7

-1.3

-7.7

Q4

10.7

30.5

16.9

18.0

0.2

0.7

-2.1

Jan

-

-

-

-

21.0

1.5

4.3

Feb1

-

26.6

17.9

20.7

45.7

2.7

5.4

Source: China National Bureau of Statistics

1. January-February average for fixed asset investment, retail sales and industrial production

Eurozone

Source: Eurostat

Real GDP


Retail sales

Exports (y-o-y, %)


2008 2009 2010


Annual

0.8

-1.8

-0.2

3.7

3.3

Q4

-1.9

-6.0

-1.5

-4.9

2.3

Annual

-4.0

-14.7

-2.8

-18.1

0.3

Q1

-2.5

-7.4

-1.0

-21.1

1.0

Q2

-0.1

-2.7

-0.3

-23.2

0.2

Q3

0.4

0.7

-0.2

-19.3

-0.4

Q4

0.1

1.9

0.0

-8.3

0.4

Jan

-

1.5

-0.2

4.6

1.0

Feb

-

-

-

-

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 2010


Annual

-0.7

-3.4

0.3

-3.5

1.4

Q4

-2.7

-11.3

-1.5

-23.1

1.0

Annual

-5.2

-22.3

-2.2

-33.1

-1.4

Q1

-3.6

-22.1

-3.9

-46.9

-0.1

Q2

1.5

8.3

-0.9

-38.5

-1.0

Q3

-0.1

7.4

-3.4

-34.4

-2.2

Q4

0.9

4.5

-0.7

-8.0

-2.0

Jan

-

2.7

2.3

40.9

-1.3

Feb

-

-0.9

4.2

45.3

-1.1


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Economic Bulletin 7

Eurozone GDP growth and industrial production

Source: Eurostat

Japans GDP growth

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

Chinas GDP and fixed asset investment

Source: National Bureau of Statistics of China1-4

1-5

1-6


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8 April 2010

2. Private consumptionPrivate consumption ( preliminary GDP) in the fourth quarter of 2009 increased 0.4 percentquarter-on-quarter and 5.8 percent year-on-year.

Consumer goods sales in February 2010 was up 1.8 percent month-on-month, due to brisksales of durable and non-durable goods, while jumping 12.9 percent year-on-year.

On a month-on-month basis, both durable goods sales such as home appliances andcomputer & communications devices and non-durable goods sales such as vehicle fuelsexpanded 3.4 percent and 2.0 percent, respectively, whereas semi-durable goods sales fell1.4 percent.

On a year-on-year basis, consumer goods sales picked up due to a low base effect from thesame period of the previous year and in particular, an increase in durable goods sales suchas automobiles.

Sales at department stores continued an upward march for the tenth consecutive monththanks to the lunar new year holidays, while those at large discounters reboundedsubstantially.


Consumer goods sales

(Seasonally adjusted)2

- Durable goods3

Automobiles

- Semi-durable goods4

- Non-durable goods5

1. Preliminary

2. Percentage change from previous period

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

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

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

Source: Statistics Korea

2008 2009 2010

Annual

1.1

-

1.6

-3.5

-3.0

1.4

Q4

-4.2

-3.6

-9.6

-21.0

-10.7

0.2

Annual

2.6

-

8.1

21.8

0.3

1.2

Q1

-4.7

1.0

-11.9

-20.6

-1.5

-1.4

Q2

1.5

5.1

5.7

20.1

-0.6

0.5

Q3

2.8

0.3

7.9

24.1

-0.7

1.9

Q4

10.8

4.1

33.9

76.9

3.4

4.1

Dec

12.7

1.2

45.8

92.0

7.2

1.5

Jan 1

6.8

-1.3

39.7

73.0

4.7

-5.2

Feb1

12.9

1.8

21.3

34.6

3.1

12.4


Annual Q4 Annual Q1 Q2 Q3 Q4 Dec Jan1 Feb1

- Department stores

- Large discounters

- Specialized retailers2

2008 2009 2010

1. Preliminary

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


1.2

2.5

-1.8

-4.3

-1.0

-8.2

3.3

-2.0

2.9

-0.8

-4.4

-6.6

0.4

-2.9

2.6

4.2

-3.4

3.5

9.1

3.2

12.6

14.7

5.4

14.1

6.5

-9.3

10.7

17.3

27.9

7.7


Private consumption2


2007 2008 20091

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

Source: The Bank of Korea

Annual

5.1

-

Annual

1.3

-

Q3

1.8

0.1

Q4

-3.6

-4.5

Annual

0.2

-

Q1

-4.4

0.3

Q2

-1.0

3.3

Q3

0.7

1.7

Q4

5.8

0.4


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Economic Bulletin 9

Consumer goods sales

Source: Statistics Korea (industrial activity trend)

Private consumption

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

2-2

2-3 Consumer goods sales by type



11/71

10 April 2010

Consumer goods sales in March, while increasing year-on-year, is projected to slow downfrom a month earlier, given low estimates of advanced indicators such as retailers sales,bad weather conditions and a high base effect from the previous month.

Domestic credit card spending was up 19.1 percent year-on-year, slightly decelerating fromthe previous month.

Sales at department stores and large discounters fell sharply due to a drop in bargain saledays.

Domestic sales of Korean automobiles remained brisk, despite the expiration of the taxbreak for new car purchases at the end of 2009, while gasoline sales continued to rise for asecond consecutive month in March.

Despite temporary seasonal adjustment, private consumption is expected to continue to

increase, backed by a recently improving employment trend, stabilizing consumer prices andfinancial markets, and growing consumer sentiment.

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


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


Discount store sales (y-o-y, %)4.5 (Oct 2009) -2.8 (Nov) 3.9 (Dec) -13.4 (Jan 2010) 30.8 (Feb) 1.1 (Mar)

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


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

20.7 (Oct 2009) -3.0 (Nov) -4.5 (Dec) -0.6 (Jan 2010) 8.3 (Feb) 6.9 (Mar)

Source: Ministry of Knowledge Economy

The Credit Finance Association

Korea Automobile Manufacturers Association

Korea National Oil Corporation

Ministry of Strategy and Finance (for February data)

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

1.0 (Oct 2009) -1.0 (Nov) -1.6 (Dec) 0.5 (Jan 2010) 12.5 (Feb)


2.4 (Nov 2009) 2.8 (Dec) 3.1 (Jan 2010) 2.7 (Feb) 2.3 (Mar)

KOSPI (month-end)

1,556 (Nov 2009) 1,683 (Dec) 1,602 (Jan 2010) 1,595 (Feb) 1,693 (Mar)

Won/dollar exchange rate (month-end)

1,167 (Nov 2009) 1,168 (Dec) 1,157 (Jan 2010) 1,158 (Feb) 1,131 (Mar)

Consumer Sentiment Index(CSI, base=100)

117 (Oct 2009) 113 (Nov) 113 (Dec) 113 (Jan 2010) 111 (Feb) 110 (Mar)


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Economic Bulletin 11

Department store and discount store sales (current value)

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

2-5

2-6 Consumer sentiment index


Domestic automobile sales

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


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12 April 2010

3. Facility investment

Facility investment (preliminary GDP ) in the fourth quarter of 2009 posted a quarter-on-

quarter increase of 5.3 percent, and a year-on-year gain of 13.3 percent.

Facility investment in February 2010 rose 7.8 percent month-on-month and 18.0 percent

year-on-year on the back of an increase in machinery investments including those in semi-conductor equipment.

Facility investment in March is expected to continue an upward trend, given improving

corporate investment confidence amid the economic recovery, growing machinery imports,and high pressure on facilities investment adjustment.


Facility investment2


- Machinery

- Transportation equipment

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


2007 2008 20091

Annual

9.3

-

9.2

9.6

Annual

-1.0

-

-1.8

1.8

Q1

2.8

0.4

-0.9

17.5

Q2

2.0

1.2

0.9

5.9

Q3

5.3

-1.0

8.0

-3.8

Q4

-13.3

-13.9

-14.4

-9.8

Annual

-9.1

-

-13.0

4.7

Q1

-23.1

-10.5

-23.2

-22.6

Q2

-17.3

9.0

-21.5

-2.9

Q3

-7.0

10.8

-14.8

22.9

Q4

13.3

5.3

10.0

24.2


Facility investment


- Machinery

- Transportation equipment

Domestic machinery orders

- Public

- Private

- Machinery imports

Facility investmentadjustment pressure3

1. Preliminary


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

Sources: Statistics Korea & The Korea International Trade Association

2007 2008 2009 2010

Annual

8.2

-

7.5

11.3

20.6

-11.4

24.5

22.1

1.7

Annual

-3.0

-

-4.2

2.1

-13.8

5.0

-15.5

6.4

-1.7

Annual1

-8.0

-

-12.9

12.0

-11.8

61.7

-19.9

-16.6

-4.0

Q1

-17.9

-10.2

-22.1

0.1

-35.5

150.8

-44.8

-27.9

-19.1

Q2

-12.9

5.6

-18.9

11.8

-17.7

29.9

-22.3

-27.4

-8.9

Q3

-10.0

2.4

-17.0

20.0

3.4

280.2

-16.0

-15.9

1.2

Q4

10.2

13.9

8.8

15.5

20.0

-27.2

35.2

-7.2

12.8

Dec

21.1

5.9

19.5

27.4

21.2

-44.5

52.4

24.7

31.5

Jan 1

19.4

-10.6

13.5

43.2

11.2

-27.1

17.8

34.2

34.4

Feb1

18.0

7.8

25.7

-5.5

-3.1

-79.4

30.9

33.6

15.0


Nov Dec Jan Feb Mar Apr

Business survey indices (base=100) for 96 98 103 101 103 104manufacturing facility investment projections

2009 2010


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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


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14 April 2010

4. Construction investment

Construction investment (preliminary GDP) in the fourth quarter of 2009 rose 5.0 percent

year-on-year, while falling 0.1 percent quarter-on-quarter.

Construction completed (constant value ) in February fell 3.9 percent month-on-month, and

2.4 percent year-on-year, due to a high base effect in building construction from the

previous month and weak performance in civil engineering works, affected by the

completion of large-scale private plant construction. By construction category, building

construction completed dropped 3.9 percent year-on-year, while civil engineering works

completed down 0.5 percent.

Construction investment in March is expected to be negatively affected by sluggish building

construction due to a rise in unsold houses and a lack of sales confidence, despite

increasing public investment in civil engineering works.


Construction investment2


- Building construction

- Civil engineering works

1. Preliminary

2. National accounts



2007 2008 20091

Annual

1.4

-

-0.0

3.8

Annual

-2.8

-

-4.6

-0.2

Q1

-2.5

-4.2

-1.0

-5.1

Q2

-0.5

-0.4

-0.8

-0.2

Q3

0.4

0.7

0.2

0.8

Q4

-7.7

-3.3

-14.8

1.6

Annual

4.4

-

-1.8

13.3

Q1

2.8

5.9

-9.6

26.1

Q2

5.1

1.8

-2.4

15.7

Q3

4.4

-0.7

1.2

9.7

Q4

5.0

-0.1

2.5

7.5


Construction completed(constant value)(Seasonally adjusted)2

- Building construction

- Civil engineering works

Construction orders (current value)

- Public

- Private

Building permit Area

1. Preliminary


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

2007 2008 2009 2010

Annual

3.4-

3.2

4.6

23.6

40.3

16.5

13.3

Annual

-8.1-

-10.3

2.2

-7.6

10.0

-14.3

-20.1

Annual1

1.7-

-6.5

-5.7

3.0

60.9

-21.9

-12.9

Q1

-5.49.4

-15.5

13.4

-12.0

33.1

-37.3

-31.6

Q2

4.53.5

-6.5

25.9

-1.1

182.9

-60.2

-32.7

Q3

1.8-5.3

-5.1

15.4

7.6

78.9

-14.3

-4.6

Q4 1

5.0-1.3

0.7

11.4

11.6

11.6

17.3

13.1

Dec1

12.70.8

7.4

19.3

-19.6

-33.9

-9.6

42.7

Jan 1

3.57.8

4.6

2.1

17.1

-14.7

49.4

33.3

Feb1

-2.4-3.9

-3.9

-0.5

-6.7

-23.5

4.7

42.3

Source: The Construction and Economy Research Institute of Korea

Nov Dec Jan Feb Mar

Business survey indices (base=100) for 90.1 83.6 74.8 91.4 88.9construction projections

2009 2010


16/71


Leading indicators of construction investment

Source: Statistics Korea (construction orders)

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

Construction completed and housing construction

Source: Statistics Korea (construction completed)

Kookmin Bank (housing construction)

Construction investment


4-2

4-3


17/71

16 April 2010

5. Exports and imports

Exports in March rose 35.1 percent year-on-year to US$37.69 billion.

Exports grew at a faster pace from the previous months 30.5 percent, as major export

markets such as the US and China continued to recover. Average daily exports fell to

US$1.57 billion from the previous months US$1.62 billion, whereas those excluding vessels

rose from the previous months US$1.37 billion to US$1.43 billion.

By export category, semiconductors (up 123.8%) and automobiles (up 62.5% ) soared, and

by regional category, exports to China (up 51.4%) and ASEAN (up 47.6%) jumped.

Imports in March jumped 48.4 percent year-on-year to US$35.49 billion. Non-ferrous metals

(up 82.3% ), crude oil (up 81.5%) and petroleum products (up 41.4%) posted a significant

increase, due to the recovering economy and a price rise in raw materials. Average dailyimports edged down from the previous months US$1.52 billion to US$1.48 billion. Imports

of capital goods, raw materials and consumer goods expanded greatly year-on-year.

The trade balance in March posted a surplus of US$2.19 billion, widening a surplus from the

previous month.

Raw materials (y-o-y, %)

-39.3 (Q3, 2009) -2.3 (Q4); 25.5 (Jan 2010) 42.7 (Feb) 51.1 (Mar)

Capital goods (y-o-y, %)

-13.7 (Q3, 2009) 8.2 (Q4); 30.1 (Jan 2010) 30.0 (Feb) 49.1 (Mar)

Consumer goods (y-o-y, %)-20.9 (Q3, 2009) 4.6 (Q4); 21.3 (Jan 2010) 30.3 (Feb) 32.5 (Mar)

(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

73.97

-35.6

1.06

Q3

94.78

-17.6

1.32

84.85

-31.0

1.18

Q4

103.97

11.7

1.49

92.85

1.4

1.33

Mar

27.89

-22.5

1.16

23.92

-35.5

1.00

Q1

101.64

36.6

1.52

98.01

37.2

1.46

Jan

30.82

45.8

1.37

31.45

26.3

1.40

Feb

33.14

30.5

1.62

31.06

37.5

1.52

Mar

37.69

35.1

1.57

35.49

48.4

1.48

Source: Korea Customs Service

(US$ billion)

Trade Balance

2009 2010

Annual

40.45

Q1

3.0

Q2

16.39

Q3

9.94

Q4

11.12

Mar

3.97

Q1

3.64

Jan

-0.64

Feb

2.08

Mar

2.19

Source: Korea Customs Service


18/71


Imports (customs clearance basis)

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

Trade balance


Exports (customs clearance basis)


5-1

5-2

5-3


19/71

18 April 2010

6. Mining and manufacturing production

Mining and manufacturing production increased 3.6 percent month-on-month in February,

the largest since September 2009, while rising 19.1 percent year-on-year.

By business category, semiconductors and parts (up 10.9%), and automobiles (up 10.5%)grew month-on-month, while audio visual communication equipment (down 7.4% ) and

miscellaneous transportation equipment (down 5.9%) fell.

Shipments, led by domestic consumption and exports, continued to improve, posting a 14.3

percent increase year-on-year, while inventory rose 4.7 percent, picking up for the first time

in 14 months since January 2009.

By business category, the shipments of semiconductors and parts (up 41.5%), and

automobiles (up 32.4% ) increased year-on-year, while those of leather and shoes (down

15.9%) declined. The inventories of semiconductors and parts (up 42.1%), and automobiles

(up 10.8%) rose year-on-year, while those of apparels and fur (down 34.6%), and primary

metals (down 4.7%) fell.

The average operation ratio of the manufacturing sector rose 1.6 percentage points from the

previous month, landing at 80.5 percent, the highest level since April 2008.

Mining and manufacturing production in March is projected to be affected by growing

exports and inventories, led by semiconductors and parts, and automobiles, while the

month-on-month increase is expected to be limited due to a high base effect from the

previous month, which saw a significant increase.

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

(y-o-y)

- Manufacturing

ICT 3

Automobiles

Shipment

- Domestic demand

- Exports

Inventory4

Average operation ratio (%)

Production capacity

1. Preliminary

2. Including mining, manufacturing, electricity and gas industry

3. Information and Communication Technology4. End-period



Mining andmanufacturingactivity2

Manufacturingactivity

2009 20102008

Annual

-

3.4

3.4

3.4

9.1

2.6

-0.4

7.2

7.1

77.5

5.1

Annual

-

-0.8

-0.9

7.8

-6.8

-1.7

-1.8

-1.7

-8.0

74.6

3.1

Q3

6.9

4.3

4.4

13.2

15.8

2.1

3.4

0.4

-14.2

78.8

3.2

Q4

1.3

16.2

16.8

46.3

14.7

12.8

12.3

13.3

-8.0

78.4

4.0

Feb

1.8

18.1

18.8

-14.9

-20.0

15.5

13.9

17.5

-14.6

78.2

3.9

Dec

2.4

34.2

36.0

89.3

58.8

26.2

26.3

26.1

-8.0

79.6

4.5

Jan 1

0.0

36.9

38.9

63.3

83.0

32.0

30.6

34.0

-3.7

78.9

4.5

Feb1

3.6

19.1

19.8

39.8

32.5

14.3

12.6

24.8

4.7

80.5

4.8


20/71


Average manufacturing operation ratio


6-1

6-2

6-3



Inventory



21/71

20 April 2010

7. Service sector activity

Service activity in February 2010 increased 3.1 percent from a month earlier on the back of

robust educational services and information & communication services.

By business category, educational services (up 24.1% ), information & communication

services (up 6.9%) and professional, scientific & technical services (up 6.3%) led the month-

on-month increase in service activity.

On the other hand, finance & insurance services fell 3.1 percent from the previous month.

Service activity in March is expected to continue the year-on-year growth considering

retailers sales, credit card spending and consumer sentiment. The month-on-month change

in service output, however, is likely to be significantly affected by a high base effect.


Annual Q4 Annual Q1 Q2 Q3 Q4 Dec Jan1 Feb 1

Service activity index

- Wholesale & retail

- Transportation services

- Hotels & restaurants

- Information & communication services

- Financial & insurance services

- Real estate & renting

- Professional, scientific & technical activities

- Business services

- Educational services

- Healthcare & social w elfare services

- Entertainment, cultural & sports services

- Membership organizations

- Sewerage & waste management

Weight2008 2009

100

22.0

9.0

7.8

8.4

15.3

6.3

4.8

2.9

10.8

6.0

2.9

3.8

0.4

3.6

1.3

4.3

0.7

3.3

9.7

-2.1

2.0

4.4

1.7

8.7

2.2

0.1

5.8

0.0

-4.7

-3.2

-3.0

-0.8

4.5

-7.5

0.9

0.0

7.4

8.7

3.3

-1.0

4.0

2.0

-0.4

-6.6

-1.5

0.7

8.0

5.3

1.0

-3.0

2.8

10.4

-0.5

-2.4

3.7

-0.3

-4.8

-12.7

-2.6

-1.4

6.9

-4.2

-1.7

-4.9

9.4

8.9

1.4

-3.8

0.1

2.4

-2.2

-10.0

-0.6

1.6

10.3

-2.2

3.8

-6.2

16.5

8.9

0.7

-4.8

9.0

1.9

0.3

-4.8

-2.5

1.4

9.0

6.7

0.0

-0.8

-3.7

10.4

0.0

-1.4

6.0

3.7

5.4

1.4

-0.2

1.8

5.7

21.3

2.0

0.0

-9.6

13.2

-3.8

2.4

-0.2

7.1

9.1

13.9

-0.9

2.9

3.8

11.0

4.8

6.4

14.1

11.6

-6.2

0.0

3.7

7.2

8.9

4.8

3.6

2.4

7.7

25.2

8.7

1.2

-3.3

14.9

2.6

9.1

0.3

4.3

5.5

11.6

3.0

-1.3

9.3

8.3

-0.4

2.7

-12.1

11.4

3.4

0.6

5.4

1. PreliminarySource: Statistics Korea

2010

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

18.3 (Nov 2009) 20.0 (Dec) 20.2 (Jan 2010) 21.2 (Feb) 19.1 (Mar)

Consumer sentiment index (base=100)

117 (Oct 2009) 113 (Nov) 113 (Dec) 113 (Jan 2010) 111 (Feb) 110 (Mar)


22/71


February 2010 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



23/71

22 April 2010

8. Employment

The number of workers on payroll in February 2010 increased by 125,000 from a year earlier,

while the employment rate fell by 0.4 percentage points year-on-year to 56.6 percent. In

seasonally adjusted terms, the number of employed rose by 79,000 from the previous

month and the employment rate was up 0.1 percentage point month-on-month.

By industry, employment in manufacturing (up 45,000) and services (up 310,000) climbed

while that in construction (down 87,000) and agriculture, forestry & fishery (down 143,000)

declined. Hiring in manufacturing increased for two consecutive months helped by overall

increases in exports and manufacturing output of semiconductors and automobiles. The

service sector hired more workers amid domestic demand recovery and elevated

consumption.

By status of workers, wage workers increased by 329,000 led by a surge of 593,000 in

regular workers, although the number of daily workers plunged by 239,000. Non-wage

workers including self-employed workers (down 70,000), however, plummeted by 204,000from a year earlier.

By gender, male workers (up 116,000) rose at a faster pace than female workers (up 9,000).

Number of employed (million)

Employment rate (%)

(seasonally adjusted)

Employment growth (y-o-y, thousand)(Excluding agriculture, forestry & fishery)

- Manufacturing

- Construction

- Services

- Agriculture, forestry & fishery

- Wage workers

Regular workers

Temporary workers

Daily workers

- Non-wage workers

Self-employed workers

- Male

- Female

- 15 to 29

- 30 to 39

- 40 to 49

- 50 to 59

- 60 or more

2009 20102008

Annual

23.58

59.5

59.5

145

182

-52

-37

263

-37

236

386

-93

-57

-92

-79

96

48

-119

-26

64

207

18

Q3

23.75

59.9

59.5

141

179

-52

-40

262

-38

208

347

-83

-56

-66

-76

92

49

-114

-36

92

169

30

Q4

23.64

59.4

59.2

54

46

-103

-41

187

8

137

316

-94

-85

-83

-95

43

12

-166

-92

56

206

50

Annual

23.51

58.6

58.6

-72

-34

-126

-91

186

-38

247

383

22

-158

-319

-259

31

-103

-127

-173

-24

198

54

Q1

22.90

57.4

58.8

-146

-160

-163

-43

47

14

73

318

-136

-108

-220

-197

-23

-124

-212

-159

8

193

23

Feb

22.74

57.0

58.8

-142

-148

-176

-17

45

6

117

390

-193

-80

-259

-256

-34

-85

-196

-167

25

183

13

Q2

23.74

59.3

58.6

-134

-109

-151

-113

155

-25

175

313

-5

-133

-309

-286

24

-158

-99

-213

-27

156

49

Q3

23.75

59.1

58.7

-1

24

-143

-103

269

-25

356

386

125

-155

-357

-276

34

-34

-123

-169

-30

211

109

Q4

23.63

58.7

58.5

-6

110

-49

-107

264

-116

413

492

186

-264

-424

-307

89

-94

-77

-149

-46

230

37

Feb

22.87

56.6

58.3

125

268

45

-87

310

-143

329

593

-24

-239

-204

-70

116

9

-16

-37

-39

255

-39

Jan

22.87

56.6

58.2

5

165

29

-81

213

-160

244

609

-121

-244

-240

-113

91

-9

14

-81

-56

233

-105



24/71


Share of employed by industry

Source: Statistics Korea (employment trend)

8-1

8-2

8-3 Share of employed by status of workers


Number of employed and employment growth



25/71

24 April 2010

The number of unemployed in February 2010 climbed by 244,000 year-on-year to record1,169,000 and the unemployment rate rose by 1.0 percentage point to 4.9 percent from ayear earlier. When seasonally adjusted, the number of jobless people fell 119,000 from theprevious month to 1,076,000 while the unemployment rate dropped 0.4 percentage pointsmonth-on-month to 4.4 percent.

The number of jobseekers increased as an economic recovery and public work projectsboosted expectations over an improvement in the labor market, which led to the number ofunemployed persons and the unemployment rate to remain high in February as did in January.

By gender, the number of female workers who became jobless (up 143,000) increased at afaster pace than that of male workers who became jobless (up 101,000) in February.

By age, the jobless surged among youths aged 15 to 29 (up 61,000) and seniors aged 60 orover (up 98,000).

The economically inactive population in February was up 151,000 from a year earlier to post16,380,000. Meanwhile, the labor force participation rate was up 0.2 percentage points year-on-year to 59.5 percent. When seasonally adjusted, the economically inactive populationrose 74,000 month-on-month to 15,770,000 while the labor force participation rate fell 0.1percentage point to 61.0 percent from a month earlier.

Workers quitting jobs due to childcare & housework (up 86,000 ) and old age (up 196,000)surged while those who quit due to reasons such as rest, time-off, and leisure (down189,000) significantly decreased.

Number of unemployed (thousand)

Unemployment growth (y-o-y, thousand)

- Male

- Female

Unemployment rate (%)

(Seasonally adjusted)

- Youth aged 15 to 29

- Middle school graduate or under

- High school graduate

- College, univ. graduate or over

2009 20102008

Annual

769

-14

-12

-1

3.2

3.2

7.2

2.2

3.8

3.0

Q3

752

-5

1

-6

3.1

3.2

6.9

2.1

3.8

2.9

Q4

757

24

25

-1

3.1

3.2

7.0

2.1

3.8

2.9

Annual

889

119

80

40

3.6

3.6

8.1

2.5

4.4

3.5

Feb

924

106

72

34

3.9

3.5

8.7

2.9

4.5

3.8

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

Feb

1,169

244

101

143

4.9

4.4

10.0

4.9

5.1

4.6

Jan

1,216

368

154

214

5.0

4.8

9.3

7.1

5.2

3.8


Economically inactive population (million)

Labor force participation rate (%)

Growth in economically inactive

population (y-o-y, thousand)

- Engaged in family duties

- Retired

- Rest

2009 20102008

Annual

15.25

61.5

297

123

76

31

Q3

15.15

61.8

289

134

104

-27

Q4

15.37

61.3

372

112

59

99

Annual

15.70

60.6

447

188

88

123

Feb

16.23

59.3

509

261

76

124

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

Feb

16.38

59.5

151

86

196

-189

Jan

16.31

59.6

150

190

190

-231



26/71


Unemployment rate and youth unemployment rate


8-4

8-5

8-6 Economically active population


Employment rate



27/71

26 April 2010

9. Financial market

9.1 Stock market

The Korean stock market in March rallied on the back of eased concerns over fiscal woes inGreece and expectations of an economic recovery.

Optimism grew as public debt problems engulfing Greece could be resolved, thanks to a

successful issuance of Treasury bonds by the Greek government and an agreement by EU

leaders on a bailout plan combining bilateral loans and money from the IMF for a standby aid

package for Greece.

The stock market stayed on an upward trend despite a fall in leading indicators and the

sinking of the naval patrol ship Cheonan. Improved economic indicators in the US labor

market and commitments to maintain expansionary monetary policies in the US, China and

Japan fueled the market rally.

The foreign investors maintained the net-buying position, which pushed up the monthly net-

purchasing of shares to the second largest amount ever.

9.2 Exchange rate

The won/dollar exchange rate as of end-March fell 28.7 won from 1,160.0 won at the end of

February to wrap up the month at 1,131.3 won.

The wons value against the dollar appreciated as an agreement on the EU-IMF bailout plan

for Greece eased credit concerns in the eurozone while foreign investors continued net-

buying of Korean shares which amounted to around 5.6 trillion won during the month.

The won/yen exchange rate fell 85.4 won month-on-month to 1,213.6 won as of end-March

as the yen depreciated with eased concerns on sovereign debt woes in eurozone countries.

Feb 2010 Mar 2010 Change1 Feb 2010 Mar 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 Feb Mar Change1

Won/Dollar 929.8 936.1 1,259.5 1,164.5 1,160.0 1,131.3 2.54

Won/100Yen 783.4 828.6 1,396.8 1,264.5 1,299.0 1,213.6 7.04

2006 2007 2008 2009 2010

KOSPI KOSDAQ

(End-period, point, trillion won)

1,594.6

844.1

4.0

32.1

1,692.9

903.9

4.3

32.5

+98.3 (+6.2%)

+59.9 (+7.1%)

+0.3 (+7.5%)

+0.4 (+1.2%)

507.3

87.7

2.3

7.5

515.7

90.0

2.3

7.6

+8.7 (+1.7%)

+2.3 (+2.6%)

0.0 (0.0%)

+0.1 (+1.3%)


28/71


9-1

9-2

9-3 Recent foreign exchange rate

Foreign exchange rate (month-end)

Stock prices


29/71

28 April 2010

9.3 Bond market

Treasury bond yields were down in March as leading economic indicators shifted to a fall

while the newly appointed governor of the Bank of Korea was expected to maintain

expansionary monetary policies. The yields had plunged until mid March as the policy rate

was expected to remain low, before edging up toward the end of the month due to profittaking and concerns over exit strategy.

9.4 Money supply & money market

The M2 (monthly average) in January 2010 expanded 8.8 percent from a year earlier

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

The year-on-year M2 growth remained at the same level of 8.8 percent compared to the

previous month despite reduced private credit and decreased money supply in the overseas

sector, as the government borrowed 3 trillion won on January 26 from the Bank of Korea.

In February 2010, bank deposits continued to rise as asset management company (AMC)

deposits shifted to an increase.

Bank deposits sustained an upward trend as depositors perceived deposit rates favorable

and efforts to lower the loan-deposit ratio by banks continued. AMC deposits reversed

course to a surge thanks to a massive inflow of funds from banks and the government.

Dec Dec Dec Dec Jan Feb Mar Change1

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

CD (91 days) 4.86 5.82 3.93 2.88 2.88 2.88 2.78 -10

Treasury bonds (3 yrs) 4.92 5.74 3.41 4.44 4.27 4.10 3.89 -21

Corporate bonds (3 yrs) 5.29 6.77 7.72 5.56 5.39 5.24 4.89 -35

Treasury bonds (5 yrs) 5.00 5.78 3.77 4.98 4.82 4.62 4.52 -10

(End-period, %)

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

20102009200820072006

Bank deposits

AMC deposits

(Monthly change, end-period, trillion won)

1. Balance at end February 2010, trillion won

2008 2009 2010

Annual

104.3

63.0

Feb

9.9

13.9

Annual

54.8

-27.7

Feb

23.1

11.4

Dec

-8.3

-11.1

Jan

15.7

-5.0

Feb

16.9

9.7

Feb1

1,040

336

M1+2

M2

Lf3

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

1. Balance at end January 2010, 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 December 2009, trillion won

2009 2010

Annual

-1.8

14.3

11.9

2008

Q1

-12.4

13.3

11.6

Q2

-0.1

15.3

12.8

Annual

16.3

10.1

Upper7

Q3

2.1

14.7

12.1

Q4

5.0

13.8

11.2

Q1

10.8

11.5

8.8

Q2

17.6

10.1

7.3

Q3

18.9

9.5

7.5

Q4

17.8

9.3

7.4

Jan

15.1

8.8

Upper7

Jan 1

381

1,566

2,0074

Dec

16.4

8.8

Upper7


30/71


Total money supply


Interest rates

Source: The Bank of Korea9-4

9-5

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


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


31/71

30 April 2010

10. Balance of payments

Koreas current account shifted to a surplus of US$160 million in February 2010.

The goods account surplus increased moderately to post US$1.53 billion from the previous

months US$1.38 billion as the trade account turned to a positive territory.

As the travel account deficit declined with the end of winter vacation, the service account

reduced the deficit to US$1.78 billion from US$2.16 billion of the previous month.

The income account surplus expanded to record US$570 million from US$470 million a

month earlier as an increase in the interest account surplus exceeded a decrease in the

dividend account surplus.

The current transfer account deficit narrowed to US$160 million from the previous months

US$310 million with decreased outward remittance.

The capital and financial account in February 2010 posted a net inflow of US$250 million.

The direct investment account decreased the net outflow to register US$760 million from the

previous months US$1.68 billion mainly due to decreasing outbound foreign direct

investment (FDI).

The portfolio investment account increased the net inflow to record US$3.13 billion fromUS$150 million a month earlier on the back of overseas bond issuances and a net inflow of

foreign investment fund into the Korean bond market.

The net inflow in the financial derivatives account expanded to post US$250 million from

US$50 million in the previous month as profits from overseas financial derivative

transactions increased.

The other investment account turned to a deficit of US$2.32 billion from the previous

months surplus of US$6.02 billion as financial institutions lending increased while

borrowing plunged.

The current account is likely to record a surplus of around US$1.0 to 1.5 billion in March as

the goods account surplus expanded despite higher dividend payments.

Capital & financial account balance (US$ billion)

-1.40 (Q1 2009) 8.68 (Q2) 14.40 (Q3) 4.77 (Q4) 4.47 (Jan 2010) 0.25 (Feb)

Current account

- Goods balance

- Service balance

- Income balance

- Current transfers

(US$ billion)

2009 20102008

Annual

-5.78

5.67

-16.67

5.90

-0.67

Annual

42.67

56.13

-17.20

4.55

-0.81

Q1

8.62

8.31

-1.93

0.92

1.31

Q2

13.10

17.58

-4.17

0.29

-0.60

Q3

10.40

14.70

-5.33

1.69

-0.66

Q4

10.56

15.54

-5.77

1.65

-0.86

Jan-Feb

-0.47

2.91

-3.94

1.03

-0.47

Jan

-0.63

1.38

-2.16

0.47

-0.31

Feb

0.16

1.53

-1.78

0.57

-0.16



32/71


Capital & financial account balance

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

Travel balance

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

Current account balance

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

10-2

10-3


33/71

32 April 2010

11. Prices and international commodity prices

11.1 Prices

Consumer prices in March increased 2.3 percent year-on-year while posting 0.3 percent growthfrom the previous month.

Core consumer prices, which exclude the prices of oil and agricultural products, rose by 1.5percent year-on-year. Consumer prices for basic necessities, a barometer of perceivedconsumer prices, were up 2.9 percent compared to the same month of the previous year.

Prices of agricultural, livestock and fishery products as well as oil products showedstrength, while other industrial products prices and service charges were stabilized. Pricesof agricultural, livestock and fishery products maintained the upward track as bad weatherconditions led to a drop in vegetable production.

Prices of agricultural, livestock & fishery products in Mar 2010 (m-o-m, %)Chinese cabbage (54.4), unripe hot pepper (32.9), green pepper (55.0), cucumber (13.2), mandarin orange

(10.9), pork (-3.7), spinach (-33.5), Korean beef (-2.1)

Although higher international oil prices pushed up oil product prices, prices of other industrialproducts stabilized with a mere 0.4 percent increase month-on-month.

Prices of Dubai crude (US$/barrel)67.7 (Sep 2009) 73.2 (Oct) 77.7 (Nov) 75.5 (Dec) 76.8 (Jan 2010) 73.6 (Feb) -77.3 (Mar)

Public utility charges edged down 0.3 percent from the previous month as most public utilitycharges remained unchanged while SK Telecom, Koreas biggest mobile telephone operator,started to charge voice calls by each second in March, slashing mobile call charges.

Personal service charges significantly slowed its upward trend compared to the ordinary Marchlevel with relatively stabilizing education service charges affected by universities efforts to

freeze tuition fees.

Price increases of personal service charges in Mar 2010 (m-o-m, %)1.4 (2006) 1.6 (2007) 1.9 (2008) 0.7 (2009) 0.5 (2010)

Consumer price inflation in major sectors

Publicutility

Industrialproducts

Oilproducts

TotalAgricultural,

livestock & fisheryproducts

Housingrents

Personalservices

Month-on-Month (%)

Contribution (%p)

Year-on-Year (%)

Contribution (%p)

0.3

0.35

2.3

2.31

1.6

0.14

4.0

0.35

0.3

0.13

3.0

0.93

1.8

0.11

10.9

0.60

0.2

0.02

1.4

0.15

-0.3

-0.04

1.3

0.22

0.5

0.18

2.3

0.76


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)

Mar

0.7

3.9

4.5

0.4

3.1

Apr

0.3

3.6

4.2

0.2

3.0

May

0.0

2.7

3.9

0.2

1.8

Jun

-0.1

2.0

3.5

0.1

0.5

Jul

0.4

1.6

3.2

0.2

0.4

Aug

0.4

2.2

3.1

0.1

1.3

Sep

0.1

2.2

2.7

0.1

1.7

Oct

-0.3

2.0

2.6

0.1

1.5

Nov

0.2

2.4

2.5

0.2

2.3

Dec

0.4

2.8

2.2

0.1

3.3

Jan

0.4

3.1

2.1

0.1

3.8

Feb

0.4

2.7

1.9

0.2

3.4

Mar

0.3

2.3

1.5

0.1

2.9

2010


34/71


Contribution to consumer price inflation

Source: Statistics Korea (consumer price trend)

Prices

Source: Statistics Korea (consumer prices, core inflation) & The Bank of Korea (producer prices)11-1

11-2

11-3

Consumer price inflation

Source: Statistics Korea (consumer price trend)


35/71

34 April 2010

11.2. International oil and commodity prices

International oil prices in March increased month-on-month as Europes financial woe eased

and expectations of an economic recovery boosted confidence with a gradual improvement in

manufacturing index. In particular, the Institute for Supply Management (ISM)s index on

manufacturing in the US jumped 3.1 points to 59.6 in March, the highest level since July 2004.

In the domestic market, both gasoline and diesel prices rose month-on-month as internaional

oil prices and international oil product prices went up.

Prices of overall non-ferrous metals in March climbed from a month earlier with the

expectations of an economic recovery. In particular, nickel prices soared due to strikes in

major nickel mines and expanded demand for stainless steel.

International prices of grain including corn and raw sugar fell from the previous month as

robust grain productions in South America boosted the grain harvest outlook for this year.

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

Corn (1.0), wheat (-1.3), raw sugar (-27.1), soybean (1.5), bronze (9.0), aluminum (7.6), nickel (18.2), zinc (6.0), lead

(2.7), tin (7.4)

(Won/liter, period average)

Annual Annual Annual Sep Oct Nov Dec Jan Feb Mar

Gasoline prices 1,526 1,692 1,601 1,681 1,627 1,655 1,646 1,661 1,664 1,691

Diesel prices 1,273 1,614 1,397 1,453 1,409 1,452 1,441 1,450 1,443 1,469

2007 2008 2009 2010

Source: Korea National Oil Corporation

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

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

(US$/barrel, period average)

Dubai crude

Brent crude

WTI crude

2007 2008 2009 2010

Annual

68.4

72.8

72.3

Annual

94.3

97.5

99.9

Annual

61.9

61.7

61.9

Sep

67.7

67.5

69.4

Oct

73.2

72.8

75.8

Nov

77.7

76.7

78.1

Dec

75.5

74.5

74.5

Jan

76.8

76.4

78.3

Feb

73.6

73.9

76.5

Mar

77.3

79.0

81.3

Source: KOREAPDS

(Period average)Reuters index*

Annual Annual Annual Sep Oct Nov Dec Jan Feb Mar

2,400 2,536 2,079 2,147 2,197 2,243 2,294 2,343 2,290 2,269

2009 201020082007

* A weighted average index of 17 major commodities

Source: KOREAPDS

Reuters index*


36/71


International oil prices

Source: Korea National Oil Corporation11-4

11-5

11-6 International commodity prices

Source: Bloomberg (CRB) & The Bank of Korea (Reuters index)* CRB demonstrates futures price index of 21 commodities listed on the US Commodity Transaction Market, including beans and other crops, crude oil and jewelry.

International oil prices (Dubai crude) and import prices

Source: Korea National Oil Corporation & Korea Customs Service


37/71

36 April 2010

12. Real estate market

12.1 Housing market

In March, nationwide apartment sales prices increased at a slower pace of 0.3 percent from

0.4 percent a month earlier.

While apartment sales prices in Seoul including Gangnam decelerated its growing pace to0.0 percent from 0.3 percent and 0.4 percent, respectively, prices remained steady inGyeonggi province (down 0.1%) and Incheon (down 0.0%).

Meanwhile, apartment sales prices in areas excluding the Seoul metropolitan areacontinued to increase led by some metropolitan cities such as Busan (up 1.5%) and Daejeon(up 0.7%) without enough apartments put up for sale.

The increase in rental prices slightly slowed to 0.8 percent from the previous months 0.9percent. In Seoul (up 0.7%), Gangnam decelerated the growing pace from 1.2 percent to 0.5

percent, while rental prices in Gangbuk accelerated the increase from 0.7 percent to 0.9percent with expanded demand during the spring moving season.

Apartment sales transactions in February 2010 edged up from 61,974 a month earlier to post66,500. The transactions were up 11.1 percent from a year earlier and 1.5 percent comparedwith the monthly average recorded in the same month for the past 3 years.

Source: Korea Land Corporation

(Monthly average, thousand)Apartment sales transactions

Nationwide

2007 2008 2009 2010

Annual

84

Annual

74

Feb

70

Annual

77

Jan

49

Feb

60

Mar

79

Apr

76

May

72

Jun

81

Jul

91

Aug

81

Sep

90

Oct

87

Nov

82

Dec

82

Jan

62

Feb

67

(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

Jan

0.1

0.1

0.2

0.0

0.0

0.4

Feb

0.4

0.3

0.4

0.1

0.1

0.8

Mar

0.3

0.0

0.0

0.0

0.0

0.7

Mar11

0.1

0.0

0.0

0.0

0.0

0.2

Mar81

0.1

0.0

0.0

0.0

0.0

0.2

Mar151

0.1

0.0

0.0

0.0

0.0

0.1

Mar221

0.1

0.0

0.0

-0.1

0.0

0.2

Mar291

0.1

0.0

0.0

-0.1

0.0

0.2

(Percentage change from previous period)Nationwide apartment rental prices

Nationwide

Seoul

Gangnam2

Gangbuk3

Seoul metropolitan area

5 metropolitan cities

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

2006 2007 2008 2009 2010

Annual

7.6

11.5

11.3

11.8

11.7

3.0

Annual

1.9

2.2

0.5

4.6

2.1

1.1

Annual

0.8

-1.8

-3.6

0.5

-0.4

1.6

Annual

4.5

8.1

10.4

5.4

5.6

3.9

Q1

-1.3

-0.8

-0.1

-1.6

-1.8

-0.9

Q2

0.9

1.8

2.4

1.0

1.4

0.4

Q3

2.8

4.7

5.1

4.2

4.1

1.9

Q4

2.0

2.3

2.7

1.9

1.8

2.6

Jan

0.4

0.6

0.9

0.1

0.3

0.7

Feb

0.9

1.0

1.2

0.7

0.7

1.4

Mar

0.8

0.7

0.5

0.9

0.7

1.0

Mar11

0.2

0.2

0.1

0.2

0.2

0.2

Mar81

0.2

0.2

0.1

0.2

0.2

0.3

Mar151

0.2

0.1

0.1

0.2

0.2

0.2

Mar221

0.2

0.2

0.2

0.2

0.2

0.2

Mar291

0.2

0.1

0.1

0.2

0.2

0.3


38/71


Apartment prices by region

Source: Kookmin Bank (national housing price trend)

Weekly apartment sales prices and monthly transaction volume

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

Real estate prices

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

12-2

12-3


39/71

38 April 2010

12.2 Land market

Continuing the moderate recovery pace, nationwide land prices in February 2010 rose 0.23

percent, slightly decelerating from the previous months 0.25 percent. Land prices in

February were 2.7 percent lower than the pre-crisis peak reached in October 2008.

In the Seoul metropolitan area (up 0.29%), land prices in Incheon (up 0.33%) and Gyeonggi

province (up 0.32%) saw a robust increase.

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

0.13 percent from 0.14 percent of the previous month.

Nationwide land transactions in February recorded 168,000 land lots, down 1.3 percent from

the previous month, which is equivalent to 91.3 percent of the monthly average (184,000) in

the same month of the past 5 years.

Nationwide land transactions decreased in terms of land lots led by Ulsan (down 22.5%),

South Jeolla province (down 11.3%) and Gyeonggi province (down 11.1%).

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

0.36 (Nov 2009) 0.38 (Dec) 0.31 (Jan 2010) 0.29 (Feb)

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

0.21 (Nov 2009) 0.26 (Dec) 0.14 (Jan 2010) 0.13 (Feb)

(Percentage change from previous period)Land prices by region

Nationwide

Seoul

Gyeonggi

Incheon

2007 2008 2009 2010

Annual

3.88

5.88

4.22

4.86

Q4

1.15

1.90

1.14

1.13

Annual

-0.31

-1.00

-0.26

1.37

Q1

1.23

1.83

1.28

1.36

Q2

1.46

2.17

1.57

1.67

Q3

1.18

1.59

1.28

2.01

Q4

-4.08

-6.34

-4.28

-3.57

Annual

0.96

1.40

1.22

1.99

Q1

-1.20

-1.38

-1.62

-1.39

Q2

0.35

0.68

0.37

0.53

Q3

0.88

1.30

1.13

1.16

Q4

0.94

0.81

1.36

1.70

Annual

0.25

0.25

0.35

0.45

Jan

0.25

0.25

0.35

0.45

Feb

0.23

0.26

0.32

0.33Source: Korea Land Corporation

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

Nationwide

Seoul

Gyeonggi

Incheon

2007 2008 2009 2010

Annual

208

33

49

13

Annual

208

26

45

13

Annual

203

22

46

10

Jan

134

13

26

7

Feb

164

15

34

7

Mar

207

20

41

9

Apr

207

24

48

10

May

192

22

45

9

Jun

215

27

49

10

Jul

222

26

50

11

Aug

206

25

48

10

Sep

226

28

56

13

Oct

212

25

52

14

Feb

168

17

34

7

Jan

170

16

39

6

Nov

207

19

48

11

Dec

241

21

58

12

Source: Korea Land Corporation


40/71


Land trade volume

Source: Korea Land Corporation (land trade trend)

12-4

12-5

12-6

Land and consumer prices since 1970s

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

Land prices by region

Source: Korea Land Corporation (land price trend)


41/71

40 April 2010

13. Composite indices of business cycle indicators

The cyclical indicator of coincident composite index increased 0.7 points month-on-month in

February 2010, continuing the upward trend.

All components of the coincident composite index including the value of construction

completed, the domestic shipment index and the mining and manufacturing production

index increased.

The year-on-year leading composite index went down 1.0 percentage point from the

previous month, continuing the downward trend for two consecutive months.

Three components of the index including the ratio of job openings to job seekers and the

capital goods imports increased, while the other six components such as the value of

construction orders received and the indicator of inventory cycle were down.

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

Value of construction completed (1.4%), domestic shipment index (0.6%), mining & manufacturing production

index (1.9%), volume of imports (1.2%), manufacturing operation ratio index (1.0%), service activity index

(1.5%), wholesale & retail sales index (1.5%), number of non-farm payroll employment (0.1%)

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

Indicator of inventory cycle (-4.5%p), ratio of job openings to job seekers (5.6%p), value of machinery orders

received (-7.1%), volume of capital goods imports (4.7%), composite stock price index (-1.0%), liquidity in the

financial institutions (0.3%), spreads between long & short term interest rates (0.0%p), net terms of trade

index (-0.3%), consumer expectations index (-2.8p), value of construction orders received (-14.9%)

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

Cyclical indicator of coincident composite index

(m-o-m, p)

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

12 month smoothed changein leading composite index (%)

(m-o-m, %p)1. Preliminary

2009 2010

1. Preliminary

Aug

0.8

98.7

0.4

0.9

8.6

1.2

Sep

0.7

98.9

0.2

0.6

9.6

0.8

Oct

0.4

98.9

0.0

0.6

10.3

0.7

Nov1

0.5

99.0

0.1

1.1

11.3

1.0

Dec1

0.4

98.9

-0.1

0.7

11.6

0.3

Jan1

0.8

99.3

0.4

0.3

11.3

-0.3

Feb1

1.2

100.0

0.7

-0.2

10.3

-1.0


42/71


Coincident and leading composite indices


13-1

13-2

13-3

Cyclical indicator of coincident composite index


Leading composite index



43/71

42 April 2010

Background

The Ministry of Strategy and Finance adopted the accrual basis accounting and double-entry

bookkeeping system to all sectors of national finance in fiscal year 2009. The rationales

behind the adoption were 1) to effectively manage national assets and reflect them innational accounting, 2) to clearly show net national assets to help citizens understand the

countrys current fiscal situation, 3) to promote more responsible budget spending through

project specific cost analyses, 4) to use various financial analysis methods of the new

accounting system in making fiscal decisions and responding to fiscal situation changes, and

5) to raise transparency and management competence of the governments financial

activities through double-entry bookkeeping.

What has been done to adopt the new system

The Ministry of Strategy and Finance has enacted and amended laws and regulations on the

National Accounting Act as belows:

- Enacting Enforcement Decree of the National Accounting Act on March 8, 2009

- Enacting National Accounting Standards on March 19, 2009, which aimed at providing

accounting standards needed for accrual basis accounting and double-entry bookkeeping

methods to be applied to national financial activities

New National Accounting System to Take Hold in Three Years

Policy Issues


44/71


- Setting up specific accounting working rules such as loan accounting working rules and

accumulating cost working rules on May 11, 2009

- Developing 12 guidelines for accounting practices between June and December 2009, three

for financial statements and nine for specific accounts such as government moneyaccounts, transactions excluding tax revenue and expenditure, and fund accounts

- Amending identified cost methods applied to government asset accounting based on the

National Accounting Act, which used to be independent of the National Accounting Act

- Adopting resolution on the amendment of National Accounting Standards at the 6th

National Accounting Standard Board on November 11, 2009, through which the basis for

reflecting national properties at their current economic value was founded

An electronic link between budget and accounting has been set in the Digital Budget and

Accounting System (dBrain). Government agencies which do not use the dBrain system have

developed agency-specific tools connecting their budgets and accountings.

Field examination of national assets such as national properties, commodities, and state

claims, which started in November 2008, has been completed, as two final field

investigations confirmed the reliability of the examination. Eight social infrastructures such

as roads, railroads, ports, dams, airports, waterworks, and river and fishing port facilities

have been under field examination since the second half of 2009, the result of which will be

reflected in the government financial statements.

The opening statement of financial position based on the 2008 national assets and liabilities

report began drawing up. The statement will be a foundation for determining basic prices for

accrual basis accounting.

The government offered online trainings as well as off-the-job trainings to 1,800 government

officials in charge of financial settlement and dBrain users.

What will be achieved in three years to fully implement the system

To fully reflect the value of social infrastructures in national accounting, field examinations

of the social infrastructures are planned to be completed in 2010, followed by asset

evaluation in 2011. The 2011 fiscal year financial statements, which will reflect the value of

the social infrastructures, will be submitted to the National Assembly in 2012.

To include provisions such as pensions and insurance in national accounting, study on

accounting methods will be completed in 2010, and applied from fiscal year 2011.


45/71

To raise professional human resources dealing with the new accounting system , a legal

basis for recruiting personnel specializing in accounting will be founded in 2010, followed by

actual recruitment beginning in 2012. Incentives will be set in 2011 to motivate government

accounting officials and enhance their professional ability.

To help smooth transition to the new accounting system, the government will temporarily

run Accounting Settlement Advisory Committee in 2010 with experts from the private sector,

which will support drawing-up of government financial statements and examine new

accounting methods.

To found a basis for the new system to firmly take hold, the examination for Certified Public

Accountants (CPAs) will cover national accounting from 2012, along with the introduction of

national certification for government accounting in 2011, given to qualified CPAs. The

national certification for government accounting is a response to increasing demand for CPA

consultation expected with the adoption of accrual basis accounting. According to the new

enforcement decree of the National Accounting Act, funds managing more than 500 billion

won are required to submit CAP audit reports along with financial statements.

National Accounting Standards Center, commissioned to develop national accounting

standards, will be set up in 2010 based on the National Accounting Act. The center will work

on practical interpretation of national accounting standards, inquiries concerning the

standards, development of financial indicators based on accrual basis accounting,

accounting systems between central and local governments, and study on foreign

governments accounting systems.

To improve accuracy and reliability of government financial statements, the government

plans to start an amendment process of the National Accounting Act in the second half of

2010. The amendment will make it possible to mandate the review of government financial

statements by private sector accounting experts from 2012. The quality of the private sector

accountants will be strictly assessed on the basis of related regulations enforced from the

second half of 2012.

44 April 2010


46/71


G-20 Steering Group leaders urge G-20 members to deliver on reforms

G-20 Steering Group leaders, South Korean President Lee Myung-bak, US President BarackObama, Canadian Prime Minister Stephen Harper, French President Nicolas Sarkozy and

British Prime Minister Gordon Brown, urged fellow G-20 members in a letter signed on March

30, to fulfill the obligations agreed upon during the Pittsburgh Summit.

As the past, current, and future chairs of the G-20 Summit, the group emphasized the need

to implement commitments to ensure strong macroeconomic policy cooperation and to

continue regulatory reforms to strengthen the international financial system.

All G-20 countries must move quickly to implement the new Framework agreed upon in

Pittsburgh to contribute to a strong, sustainable and balanced global growth as well as job

creation, noted the statement. Agreement should be reached in Toronto to fight against the

major risks to global economic stability and sustained growth. In addition, more specific

policy recommendations are needed to be developed for the Seoul Summit in November.

Meanwhile, a financial support group for Seoul G-20 Business Summit was launched on

April 5. At the business summit, about hundred international CEOs will get together on the

sidelines of a G-20 summit and share their ideas on economic collaboration between the

public and private sector.

EconomicNews Briefing


47/71

46 April 2010

Korean economy grows 0.2% in 2009 (Preliminary)

Koreas real gross domestic product (GDP) expanded by 0.2 percent in 2009 compared with

the previous year as increased government spending offset slowed private sector spendingand exports.

On the production side, the manufacturing sector decreased 1.6 percent while the service

sector increased 1.0 percent, a slowdown from the previous years 2.8 percent growth. On the

other hand, the construction turned to an increase of 1.9 percent from a decrease of 2.5

percent a year earlier.

On the expenditure side, facility investment declined at a faster pace of 9.1 percent after

falling 1.0 percent in the previous year. Private consumption and goods exports significantly

slowed the upward trend while government spending and construction investment were up

5.0 percent and 4.4 percent, respectively.

Meanwhile, real gross national income (GNI) in 2009 grew 1.5 percent backed by improving

trade. Per capita GNI at current prices, however, fell US$2,121 or 10.9 percent to post

US$17,175 from US$19,296 a year earlier, due mainly to the wons depreciation against the

dollar. Per-capita income is expected to rebound to US$20,000 this year on the back of a fast

economic recovery, said the Ministry of Strategy and Finance in a statement released on

March 26.

GDP by production and expenditure*

GDP 2.3 0.2 -4.3 -2.2 1.0 6.0 0.2 2.4 3.2 0.2

Agriculture, forestry5.6 1.6 1.5 -1.3 3.3 2.8 -0.1 -0.4 2.9 0.4

and fishery

Manufacturing 2.9 -1.6 -13.6 -7.2 1.7 13.0 -2.5 8.0 9.4 -1.7

Construction -2.5 1.9 0.0 3.2 0.3 3.3 4.4 1.2 -1.0 -0.6

Services4 2.8 1.0 -0.4 0.3 0.9 3.0 0.3 1.0 0.9 0.9

Private consumption 1.3 0.2 -4.4 -1.0 0.7 5.8 0.3 3.3 1.7 0.4

Government consumption 4.3 5.0 7.2 6.7 5.3 1.1 2.9 0.7 0.0 -2.4

Facility investment -1.0 -9.1 -23.1 -17.3 -7.0 13.3 -10.5 9.0 10.8 5.3

Construction investment -2.8 4.4 2.8 5.1 4.4 5.0 5.9 1.8 -0.7 -0.1

Goods exports5 4.6 0.0 -13.5 -3.2 2.3 15.0 -1.7 13.5 5.1 -1.5

Goods imports5 4.5 -7.9 -18.5 -13.8 -6.7 8.9 -5.8 8.7 8.0 -1.3

GNI -0.6 1.5 -5.4 -0.2 3.7 7.5 -0.7 4.9 1.1 2.7

2008 20091 20091 (Original)2

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

20091 (Seasonally adjusted)3

*At 2005 chained prices

1. Preliminary

2. Percentage changes from the same period of the previous year

3. Percentage change from the previous period

4. Wholesale & retail sales, hotels & restaurants, transportation & storage, communication services, financial & insurance services, real estate & renting,business services, public administration, defen

Documents

Economic Bulletin (Vol.32 No.4, April 2010)