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THE SOUTH KOREAN ECONOMY 2018 –
TRENDS AND PERSPECTIVES
KGCCI HALF-YEAR ECONOMIC OUTLOOK
28TH AUGUST 2018
Alexander Hirschle
Director Germany Trade & Invest Korea
www.gtai.de
© Germany Trade & Invest www.gtai.de 2
Korean Economy 2018Overview
1. GDP-Growth
2. Consumption
3. Investment
4. Exports
5. Imports
6. Sectors/Industry Perspectives
© Germany Trade & Invest www.gtai.de 3
Korean Economy – GDP
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2012 20132014
20152016
20172018
2019
2.0%
2.9%
3.3%
2.8%2.8%
3,1%2.9%
2.8%
GDP Growth of Korea yoy
Source: BOK ; 2018 and 2019: Forecast
© Germany Trade & Invest www.gtai.de 4
Korean Economy – GDP
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
GDP Growth of Korea yoy (long term)
Source: BOK ; 2018 and 2019: Forecast
© Germany Trade & Invest www.gtai.de 5
Korean Economy – GDP
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q32017 Q4
2018 Q12018 Q2
0.5…0.5%
1.1%
0.6%
1.4…
-0,2%
1.0%
0.7%
GDP Growth of Korea by quarter *)
Source: BOK ; *) on prev. quarter
© Germany Trade & Invest www.gtai.de 6
Korean Economy – GDP
2017 2018 1) 2019 1)
GDP Growth 3,1 2,9 2,8
Consumption
(private)
2,6 2,7 2,7
Facility Investment 14,6 1,2 1,7
Construction
Investment
7,6 - 0,5 -2,2
Export 2) 15,8 5,6 1,5
Import 2) 18,3 11,6 1,3
GDP-growth (in %)
Source: BOK; 1) forecast; 2) value goods, customs cleared
© Germany Trade & Invest www.gtai.de 9
Korean Economy – GDP
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
ConsumptionFac.
Investment ConstructionInvestment
ExportsImports
2.7%
1.2%
-0.5%
5.6%
11.6%
GDP Growth of Korea 2018 *)
Source: BOK; *) forecast
© Germany Trade & Invest www.gtai.de 10
Korean Economy – GDP
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
ConsumptionFac.
InvestmentConstructionInvestment
ExportsImports
2.7%
1.7%
-2.2%
1.5%
1.3%
GDP Growth of Korea 2019 *)
Source: BOK; *) forecast
© Germany Trade & Invest www.gtai.de 11
Korean Economy – Consumption
60
70
80
90
100
110
120
Jul16
Aug16
Sep16
Okt16
Nov16
Dez16
Jan17
Feb17
Mrz17
Apr17
Mai17
Jun17
Jul17
Aug17
Sep17
Okt17
Nov17
Dez17
Jan18
Feb18
Mrz18
Apr18
Mai18
Jun18
Jul18
Composite Consumer Sentiment Index
Impeachment
ElectionMoon
NK crisisEnd of honeymoon
Source: BOK
© Germany Trade & Invest www.gtai.de 12
Korean Economy – Consumption
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
2017 Q12017 Q2
2017 Q32017 Q4
2018 Q12018 Q2
0.5…
1.0%
0.8%
1.0%
0.7…
0,3%
Private Consumption Growth by quarter *)
Source: BOK ; *) on prev. quarter
© Germany Trade & Invest www.gtai.de 13
Korean Economy – Consumption
*) between 15 and 29 years, by december 2017; Source: Statistics Korea
o Relatively low because of structural problems
(demographics, education costs, household debt)
o 2017: strong increase in consumer confidence
(end of political incertainty)
➢ Expectations related with new government (plan
for income-led growth with budget expansion,
increase of wages, hiring public employees etc.)
o 2018 end of honeymoon
o Growth still relatively high (2,7%), but:
➢ Recovery trend has slowed
➢ Consumer confidence sinking (June lowest level
since 14 months)
➢ Stock market going down since January
➢ Rising unemployment as biggest concern:
➢ Youth unemployment in May 10,5% (+1,3 %-Points)
➢ Only 5.000 new jobs in July (worst result since 2010)
➢ Experts: „Most critical situation since financial crisis“
8.0
9.09.2
9.89.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
`2013 `2014 `2015 `2016 `2017
Youth unemployment 1)
© Germany Trade & Invest www.gtai.de 14
Korean Economy – Consumption
Structure of Korean Households 2016 vs 2045
(in % of all housholds)
Source: Statistics Korea; 2020: forecast
➢ Consumption will be moderate in the years to
come!
➢ Structural problem with limited growth
perspectives in the midterm:
➢ Demographics (birthrate 2017: 1,05 = all
time low, newborns – 12%)
➢ Household debt (+8% 2nd quarter 2018 yoy)
➢ Education costs
➢ Unemployment
➢ Potencial in segments which are influenced from
demographic and social factors – changes of
consumption patterns:
➢ Fast aging population = Old
➢ Time pressure and moderate economy – more
Koreans stay in their appartments = Home
➢ Number of single-households rising, increasing
individualism = Alone
➢ Sinking real household income since 2015
27.226.1
18,8
36.335.0
7.4
0
5
10
15
20
25
30
35
40
Single Two-Person Four-Person
2016 2045
© Germany Trade & Invest www.gtai.de 17
Korean Economy – Investment
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2017 Q1 2017 Q2 2017 Q3 2017 Q42018 Q1
2018 Q2
4.5… 4.3%
0.2%
-0.7%
3.4…
-6,6%
Facility Investment Growth by quarter *)
Source: BOK ; *) on prev. quarter
© Germany Trade & Invest www.gtai.de 18
Korean Economy – InvestmentFacility Investment Growth in %:
- Losing dynamic stronger than expected!
Source: BOK; *) 2018, 2019: Forecast
5.85.3
-2.3
14.6
1.21.7
-4
-2
0
2
4
6
8
10
12
14
16
2014 2015 2016 2017 2018 *) 2019 *)
© Germany Trade & Invest www.gtai.de 19
Korean Economy – Investment
Source: Compiled figures from industries/Korea Herald
➢ Strong rebound in 2017
➢ Growth was concentrated in and dependent
from a few sectors and companies (30
companies responsible for two thirds)
➢ Now losing dynamic drastically
➢ 2nd quarter facility investment -6,6%
➢ Contraction 4 months in row (first since 2000)
➢ BOK: „Investment will slow to a considerable
extent until next year“
➢ More bad news to come:
➢ Insolvencies 1st half 2018 +9%
➢ Declining operating profits expected
➢ Business survey index – 5 %-points to 75 in
July = strongest decline since Mers crisis 2015
➢ Positive: Venture Capital +60% 1st half 2018
➢ But: Relocation of industry continuing
60
65
70
75
80
85
90
95
100
105
110
Jan
15
Ap
r 1
5
Jul 1
5
Oct
15
Jan
16
Ap
r 1
6
Jul 1
6
Okt
16
Jan
17
Ap
r 1
7
Jul 1
7
Okt
17
Jan
18
Ap
r 1
8
Jul 1
8
Business Survey Index (Geschäftsklima)
© Germany Trade & Invest www.gtai.de 20
Korean Economy – Investment
Source: Compiled figures from industries/Korea Herald
97.193.2
86.980.3
0.0
20.0
40.0
60.0
80.0
100.0
120.0
TV sets Mobile Phones WashingMashines
Refrigerators
Korean companies:
Proportion of offshore production➢ Fear of „Hollowing out“
➢ Manufacturing companies relocating their
facilities abroad with increasing speed
➢ Outbound investment last 17 years double
of inbound FDI (KRI)
➢ Already now very proportion of offshore
production in some sectors (ex.
Smartphone 2010 – 2017)
➢ Reasons:
➢ Closer to market
➢ Trade protectionism (diversification)
➢ Labor costs – will increase!
© Germany Trade & Invest www.gtai.de 21
Korean Economy – Investment
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
20152016
20172018
2019
5,5806,030
6,470
7,5308,350
Minimum Wage Growth (in Korean Won)
Source: Minimum Wage Commission
© Germany Trade & Invest www.gtai.de 23
Korean Economy – InvestmentConstruction Investment Growth in %
Reasons: Decreasing number of construction starts residential and
commercial buildings/reduced SOC-budget
Source: BOK; *) 2018, 2019: Forecast
10.7
7.6
-0.5
-2.2
-4
-2
0
2
4
6
8
10
12
2016 2017 2018 *) 2019 *)
© Germany Trade & Invest www.gtai.de 24
Korean Economy – Exports
Exports: 1st half 2018 +6,5%
Source: MOTIE
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Ju
ly 2
016
Au
g 2
01
6
Sep
20
16
Oct
201
6
No
v 2
01
6
Dec
20
16
Jan
20
17
Feb
20
17
Mar
20
17
Ap
r 2
01
7
May
20
17
Ju
ne
20
17
Ju
ly 2
017
Au
g 2
01
7
Sep
20
17
Oct
201
7
No
v 2
01
7
Dec
20
17
Jan
20
18
Feb
20
18
Mar
20
18
Ap
r 2
01
8
May
20
18
Ju
ne
20
18
➢ 2017 strong rebound with +16%
➢ „Saved“ the result of Korean economy last and
especially this year
➢ Heavily influenced by semiconductor demand
➢ Other sectors still suffering and struggling
(automobiles, telecommunication)
➢ From the september 2017 declining growth rates
➢ Further downside risks/warning signs:
➢ Trade conflict USA – China (46% of exports)
➢ Intermediate products exported to China for use
in home appliances, computers, telecommunic.
➢ Highly reliant on a few countries and sectors (30
companies responsible for two thirds of exports)
➢ Exports to Vietnam stagnating (after +50% 2017)
➢Other countries catching up (China) and Korea
losing market share worldwide
OECD: Key sectors in complex and structural crisis!
© Germany Trade & Invest www.gtai.de 25
Korean Economy – Exports
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*)
2019*)
13.6%
-13.9%
28.3%
19.0%
-1.3%
2,5% 2.3%
-8.0%-5.9%
15.8%
5.6%
1.5%
Korean Exports with temporary comeback
Source: KITA, BOK; *) Forecast
© Germany Trade & Invest www.gtai.de 28
Korean Economy – Exports
Export Growth 1st half 2018 by segment (in %)
33.3
27.4
12.2 11.2
6.7
-4.7
-8.2
-16.6
-53.3-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Source: KITA
© Germany Trade & Invest www.gtai.de 29
Korean Economy – Exports
Export Growth 2017 by segment (in %): Semiconductors vs rest
0.0
10.0
20.0
30.0
40.0
50.0
60.0
SemiconductorsTotal
Total without SC
57.9
15.7
9…
Source: KITA
© Germany Trade & Invest www.gtai.de 30
Korean Economy – Exports
Export Growth 2017/1st half 2018 by segment (in %): Semiconductors vs rest
0.0
10.0
20.0
30.0
40.0
50.0
60.0
SemiconductorsTotal
Total without SC
57.9
15.7
9.4
42.9
6.5
0.0
Source: KITA
© Germany Trade & Invest www.gtai.de 32
Korean Economy – Exports
Semiconductors` proportion in Korean Exports (in %)
Dramatic increase and reliance!
0.0
5.0
10.0
15.0
20.0
25.0
2014 2015 2016 1sthalf
2017
2ndhalf
2018
1sthalf
2018
Source: KITA
o “Boom in the semiconductor industry is
hiding the weak points of Koreas
industry” (OECD)
• Beginning “super-cycle” early 2017
• Skyrocketing demand and prices
• Samsung Electronics advanced as the
biggest semiconductor company
worldwide after 25 years lead of Intel
• Exports of SC nearly 100 Bio. US$
• 2018: exports +43% 1st half
➢ Big question: “When will the party
end?”
• Still on a high level 2018
• Most probable scenario: boom will
continue, but much less dynamic
• 2019 some experts expect falling prices,
increased competition from China
© Germany Trade & Invest www.gtai.de 36
Korean Economy – Imports
Source: MOTIE
➢ After years with heavy declines 2017 strong
comeback (+18,3%)
➢ 2018 still double-digit growth
➢ Germany after two years with over-average
import growth!
➢ Higher dynamic than main competitors
➢ Decline in market share stopped
➢ Importranking +1 (Nr. 5, surpassing Australia)
➢ Import of cars, machinery, chemicals „made
in Germany with high growth rates“
➢ Forecast: 2019 losing dynamic
➢ Import of manufacturing equipment difficult
because of decreasing investment growth
-0.8%
1.9%
-16.9%
-6.9%
18.3%
11,6%
1.3%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2013 2014 2015 2016 2017 2018 *) 2019 *)
Korean Imports: Still high but declining growth
© Germany Trade & Invest www.gtai.de 39
Korean Economy – Imports
-10
-5
0
5
10
15
20
25
30
35
34.4
31…
20.9
17.917.7
11.4
7.7
6.3 6.2
-10.0
Korean Imports 1st half 2018 by sector(Growth in %, *)
Source: KITA
© Germany Trade & Invest www.gtai.de 41
Korean Economy – Imports
Source: MOTIE
0
5
10
15
20
25
30
Vietnam Australia SaudiArabia
USA Japan China Taiwan Germany
29.3
27.0
25.2
18.1
16.6
13.0
10.5
3.9
Korean Imports 2017 by Country(Growth in %)
© Germany Trade & Invest www.gtai.de 42
Korean Economy – Imports
Source: MOTIE
-10
-5
0
5
10
15
20
25
30
Vietnam SaudiArabia
Germany USA China Japan Australia Taiwan
29.2
26.4
15.5
11.0
8.6
3.3
0.3
-5.8
Korean Imports 1st half 2018 by Country(Growth in %)
© Germany Trade & Invest www.gtai.de 43
Korean Economy – Imports
-20
-15
-10
-5
0
5
10
15
20
25
30
35
2010 2011 2012 2013 2014 2015 2016 2017 2018 *)
31.6
23.3
-0.9-0.8 2.2
-16.9
-7.3
18.3
13.2
16.3
18.6
4
9.6 9.3
-1.6
-9.1
3.9
15.5
Korean Imports Total vs from Germany (Growth in %)
Total Imports
Imports fromGermany
Source: KITA; *) 1st half
© Germany Trade & Invest www.gtai.de 44
Korean Economy – Imports
Source: KITA; *) 1st half
3.4% 3.2% 3.4%
3.8%4.0%
4.8% 4.7%
4.1% 4.1%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 *)
Market share of German imports
© Germany Trade & Invest www.gtai.de 45
Korean Economy – Imports
-15
-10
-5
0
5
10
15
20
25
ScientificApparatus
SITC 87
Mach.Spec. SITC
72
Medicaland pharm.Prod. SITC
54
Electr.Machinery
SITC 77
MachineryGen. SITC
74
OrganicChemicals
SITC 51
Power gen.mach. SITC
71
RoadVehiclesSITC 78
22.1 21.4
18.1
3.2
-0.4
-1.8
-10.1-12.2
Korean Imports from Germany by sector
(2017, Growth in %)
Source: KITA
© Germany Trade & Invest www.gtai.de 46
Korean Economy – Imports
-5
0
5
10
15
20
25
30
35
40
45
RoadVehiclesSITC 78
Mach.Spec. SITC
72
Chem.Materials
SITC SITC 59
Power gen.mach. SITC
71
MachineryGen. SITC
74
OrganicChemicals
SITC 51
ScientificApparatus
SITC 87
Electr.Machinery
SITC 77
Medicaland pharm.Prod. SITC
54
40.6
25.722.9
16.3
13.18…
2.3 2…
-2.3
Korean Imports from Germany by sector
(First half 2018, Growth in %)
Source: KITA
© Germany Trade & Invest www.gtai.de 47
Korean Economy – Imports
-5
0
5
10
15
20
25
30
35
40
45
RoadVehiclesSITC 78
Mach. Spec.SITC 72
Chem.Materials
SITC SITC 59
Power gen.mach. SITC
71
MachineryGen. SITC
74
OrganicChemicals
SITC 51
ScientificApparatus
SITC 87
Electr.Machinery
SITC 77
Medicaland pharm.Prod. SITC
54
40.6
25.722.9
16.3
13.18…
2.32…
-2.3
17.7
7.7
17.9
6.3 6.2 5.7
11.48.4
20.9
Korean Imports from Germany by sector compared with total imports
(First half 2018, Growth in %)
Source: KITA
© Germany Trade & Invest www.gtai.de 52
Korean Economy – Industry PerspectivesSector Remarks/Forecasts Potential 2018
Automobiles - Difficult period with sales declines
- Downgrade of sales forecast for 2018 because of
difficult market conditions in US/China
- Labour disputes, wage hikes
- Supplier: under strong pressure (lower prices)
- Import of cars rise 18% 1st half 2018
- Electric vehicles with high sales increases 2018
=
Health/ Pharmacy and
Cosmetics
- Generally good opportunities because of shifts in
demand due to older population
- Biosimilars with high export increase (US) and
expanding facilities
- Cosmetics: first signs that boom may have peaked
- Tougher competition, weaker demand from China
- Import medical/pharm. prod. 2018 (1st half): +21%
- Medical equipment: impulses from gov. Measures
+
ICT/Electronics - Smartphone exports decreasing -17% 1st half 2018
- China catching up, Samsung losing market share
- Mobiel carriers looking shift ot other sectors
(security, AI, entertainment)
- 5G: 10 Bio. US$ investment in 2018
- Commercialisation of 5G-serives in March 2019
- Smart Factories: 20.000 until 2022 (gov. support)
- Huge investments in OLED, world market +16%
- Semiconductor: end of boom in 2019?
+/-
© Germany Trade & Invest www.gtai.de 53
Korean Economy – Industry Perspectives
Quellenangabe in eigenem Platzhalter
Sector Remarks/Forecasts Potential 2018
Chemicals - Uncertain market outlook because of global
oversupply in some areas (ethylene)
- Possible boom in Korea regarding ABS and PVC
- Import of chemical materials 1st half 2018: +18%
- Refineries with big investment projects, shifting
focus to petrochemicals
=
Energy - Energy plans of government:
- Strong focus on renewable energy: 20% of total
energy in 2030 – investment: 100 Bio. $ (-2030)
- Shutdown of old coal power plants
- Decommissioning of nuclear plants
+/-
Shipbuilding - After very difficult years hope for revovery
- 1st place worldwide in orders 1st half 2018
- Big companies still in restructuring period
- Exports 1st half 2018 strongly decreasing
- Production/export forecast 2018: -25% and -50%
-
Construction - Construction investment slowing down and
declining 2018/19.
- Growth in residential building less dynamic
because projects of boom 15/16 get completed.
- Contraction in new projects expected
- Iniatives by government to counterattack
speculation (taxes etc.).
- Cuts in SOC-budget (Infrastructure)
-
© Germany Trade & Invest www.gtai.de 54
Korean Economy – Growth
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2001 until 2005 2006 until 2010 2011 until 2015 2016 until 2020 2021 until 2025 2026 until 2030
5.0
3.8
3.2
2.9
2.5
1.8
Growth Potential
Source: BOK (until 2020), KDI (from 2021 to 2030); *) Average; Potencial growth defined as highest level of output that can be sustained over a long term period without external
or internal special effects and without triggering inflation.
© Germany Trade & Invest www.gtai.de 55
Contact Information
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bei ihrem Weg ins Ausland, wirbt für den Standort Deutschland und begleitet ausländische Unternehmen bei der Ansiedlung in Deutschland.
Gefördert durch das Bundesministerium für Wirtschaft und Energie aufgrund eines Beschlusses des Deutschen Bundestages.
© Germany Trade & Invest
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Sorgfalt erstellt. Für die Richtigkeit können wir jedoch keine Haftung übernehmen.
Berlin
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Germany
T. +49 30 200 099-0
F. +49 30 200 099-111
www.gtai.de
Bonn
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Germany
T. +49 228 249 93-0
F. +49 228 249 93-212
www.gtai.de
Seoul Office
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8th Fl. Shinwon Plaza Building
85 Dokseodang-ro, Yongsan-gu
Seoul 140-884, Korea
T. +82 (02) 797-7442
F. +82 (02) 795-7456