South Korea’s economy grew faster than expected in the final quarter of 2007, driven by increased corporate investment and a recovery in domestic consumption, the Bank of Korea said today. Korea's gross domestic product rose a seasonably adjusted 1.5 per cent in the October-December period, Up from 1.3 per cent in the previous quarter.The economy expanded 5.5 per cent from a year earlier, the fastest pace in almost two years.
The robust growth was propelled by stronger corporate spending with corporate investment in factories surging 4.4 per cent in the last quarter, reversing the third quarter’s drop. Increasing consumption also contributed to economic growth with private consumption rising 1.1 per cent.
Exports remained resilient in the final three months of 2007 thanks to strong demand from China. Exports jumped 7.3 per cent, accelerating from a 1.5 per cent growth in the third quarter. It was the biggest increase since the final quarter of 2003.
Shipments to China, South Korea’s biggest export market, soared 18 per cent from January 1 to December 20 and exports to the Middle East jumped almost 40 per cent.
The central bank is likely to come under growing pressure to cut interest rates as higher oil prices and grwoing problems in the US economy and Europe are expected to threaten export growth. The principal problem is that the bank has little room to cut interest rates due to rising inflation.
The central bank has forecast that growth in Asia’s third-largest economy will slow to 4.7 per cent this year, much lower than President-elect Lee Myung-bak’s growth target of 6 per cent. The economy expanded 4.9 per cent last year from the previous year’s 5.0 per cent growth.
Friday, January 25, 2008
Sunday, January 6, 2008
FDI in Korea 2007
Planned foreign direct investment into South Korea fell for the third consecutive year in 2007, the commerce ministry said on Sunday, raising little hope that the situation would change in 2008. New FDI commitments fell 6.5 per cent to $10.5bn in 2007, although the figure for the fourth quarter increased 12.6 per cent over the previous year to $4.19bn. The ministry forecast steady FDI inflows of around $10bn (€6.8bn, £5.1bn) for 2008
The shrinking FDI plans underline China's emergence as a magnet for foreign investment. The investment climate in South Korea has also deteriorated as a result of increasing scrutiny of foreign capital and new regulations against hostile takeovers. South Korea has welcomed greenfield investment by foreign investors but there is increasingly hostile public sentiment towards foreign buyers.
South Korea’s outgoing government plans to revise foreign investment regulations to make exclusions on national security grounds more specific and provide stronger protection for major Korean companies targeted by overseas investors.
Pledged FDI in the manufacturing sector slumped 36.7 per cent last year to $2.69bn but rose by 14.9 per cent to $7.61bn in the service sector. Despite the US subprime loan crisis, planned FDI from the US rose 37.2 per cent to $2.34bn but FDI commitments from Japan dropped by 53 per cent to $990m and those from the European Union fell 13 per cent to $4.33bn.
There are some hopes that foreign investment could rebound this year as the next government is expected to adopt more investor-friendly policies. President-elect Lee Myung-bak, who takes office on February 25, has pledged to boost economic growth by attracting more foreign investment and encouraging corporate investment. But here, as in so many other cases, the proof of the pudding will be in the eating.
“The appreciating won and slowing economic growth in the US and other developed nations remain as negative factors,” the ministry said in a statement.
The shrinking FDI plans underline China's emergence as a magnet for foreign investment. The investment climate in South Korea has also deteriorated as a result of increasing scrutiny of foreign capital and new regulations against hostile takeovers. South Korea has welcomed greenfield investment by foreign investors but there is increasingly hostile public sentiment towards foreign buyers.
South Korea’s outgoing government plans to revise foreign investment regulations to make exclusions on national security grounds more specific and provide stronger protection for major Korean companies targeted by overseas investors.
Pledged FDI in the manufacturing sector slumped 36.7 per cent last year to $2.69bn but rose by 14.9 per cent to $7.61bn in the service sector. Despite the US subprime loan crisis, planned FDI from the US rose 37.2 per cent to $2.34bn but FDI commitments from Japan dropped by 53 per cent to $990m and those from the European Union fell 13 per cent to $4.33bn.
There are some hopes that foreign investment could rebound this year as the next government is expected to adopt more investor-friendly policies. President-elect Lee Myung-bak, who takes office on February 25, has pledged to boost economic growth by attracting more foreign investment and encouraging corporate investment. But here, as in so many other cases, the proof of the pudding will be in the eating.
Friday, January 4, 2008
South Korea Debtor Bail Out Plan
South Korea’s incoming government is planning a huge bail-out covering 7.2m consumer debtors behind on loan repayments or with poor credit ratings in an effort to spur consumption and prevent a repeat of a 2004 consumer credit crisis.
President-elect Lee Myung-bak, an ex-Hyundai executive, promised help for consumer debtors during the campaign leading up to last month’s presidential election. Economists have warned that South Korean households and small companies are facing a growing risk of default amid rising interest rates and a credit squeeze at the country’s banks.
But South Korea’s top financial regulator, the Financial Supervisory Commission, took things a step forward on Thursday when it outlined a bail-out plan to Mr Lee’s transition team.
Under the plan, credit delinquents with a small amount of debt will have their interest payments reduced and repayment deadlines extended. Their credit records will also be cleared.
Chang Su-man, a member of the transition team’s economic subcommittee, said the timing and the details of the plan have not yet been decided and it still required extensive discussions.
“There is no exact data about how much it will cost, but the plan will be implemented because it is one of Mr Lee’s main campaign promises,” Mr Chang said.
Local newspapers said the planned measures could cost the government about $11bn. Mr Chang declined to confirm that, but pointed out that that would be a small amount given that Seoul has spent $179bn to bail out struggling financial institutions and companies since the 1997-98 Asian financial crisis.
The number of South Korean credit delinquents has fallen significantly since the government rescued about 1m debtors in 2004 after the bursting of a credit card bubble left banks with bad debts.
Debtors with more than Won500,000 ($534) owed and more than three months behind on their payments stood at 2.7m at the end of June, down from a peak of 3.72m in 2003. But, according to finance ministry figures, some 7m South Koreans with poor credit ratings also owe about Won18,000bn in total.
Critics said the forthcoming plan could cause serious moral hazard and hurt the country’s banks, although Lim Ji-won, an economist at JPMorgan, called it a “pre-emptive” measure as the number of defaults was likely to rise with interest rates.
President-elect Lee Myung-bak, an ex-Hyundai executive, promised help for consumer debtors during the campaign leading up to last month’s presidential election. Economists have warned that South Korean households and small companies are facing a growing risk of default amid rising interest rates and a credit squeeze at the country’s banks.
But South Korea’s top financial regulator, the Financial Supervisory Commission, took things a step forward on Thursday when it outlined a bail-out plan to Mr Lee’s transition team.
Under the plan, credit delinquents with a small amount of debt will have their interest payments reduced and repayment deadlines extended. Their credit records will also be cleared.
Chang Su-man, a member of the transition team’s economic subcommittee, said the timing and the details of the plan have not yet been decided and it still required extensive discussions.
“There is no exact data about how much it will cost, but the plan will be implemented because it is one of Mr Lee’s main campaign promises,” Mr Chang said.
Local newspapers said the planned measures could cost the government about $11bn. Mr Chang declined to confirm that, but pointed out that that would be a small amount given that Seoul has spent $179bn to bail out struggling financial institutions and companies since the 1997-98 Asian financial crisis.
The number of South Korean credit delinquents has fallen significantly since the government rescued about 1m debtors in 2004 after the bursting of a credit card bubble left banks with bad debts.
Debtors with more than Won500,000 ($534) owed and more than three months behind on their payments stood at 2.7m at the end of June, down from a peak of 3.72m in 2003. But, according to finance ministry figures, some 7m South Koreans with poor credit ratings also owe about Won18,000bn in total.
Critics said the forthcoming plan could cause serious moral hazard and hurt the country’s banks, although Lim Ji-won, an economist at JPMorgan, called it a “pre-emptive” measure as the number of defaults was likely to rise with interest rates.
Thursday, January 3, 2008
Seoul Attack It's Home Grown Sub-Prime Problem
South Korea’s incoming government is planning a huge bail-out covering 7.2m consumer debtors behind on loan repayments or with poor credit ratings in an effort to spur consumption and prevent a repeat of a 2004 consumer credit crisis. President-elect Lee Myung-bak, an ex-Hyundai executive, promised help for consumer debtors during the campaign leading up to last month’s presidential election. South Korean households and small companies are facing a growing risk of default amid rising interest rates and a credit squeeze at the country’s banks.
But South Korea’s top financial regulator, the Financial Supervisory Commission, took things a step forward on Thursday when it outlined a bail-out plan to Mr Lee’s transition team. Under the plan, credit delinquents with a small amount of debt will have their interest payments reduced and repayment deadlines extended. Their credit records will also be cleared.
Local newspapers are saying that the planned measures could cost the government about $11bn.
The number of South Korean credit delinquents has fallen significantly since the government rescued about 1m debtors in 2004 after the bursting of a credit card bubble left banks with bad debts.
The number of debtors with more than Won500,000 ($534) owed and more than three months arrears on their payments stood at 2.7m at the end of June, down from a peak of 3.72m in 2003. But, according to finance ministry figures, some 7m South Koreans with poor credit ratings also owe about Won18,000bn in total.
But South Korea’s top financial regulator, the Financial Supervisory Commission, took things a step forward on Thursday when it outlined a bail-out plan to Mr Lee’s transition team. Under the plan, credit delinquents with a small amount of debt will have their interest payments reduced and repayment deadlines extended. Their credit records will also be cleared.
Local newspapers are saying that the planned measures could cost the government about $11bn.
The number of South Korean credit delinquents has fallen significantly since the government rescued about 1m debtors in 2004 after the bursting of a credit card bubble left banks with bad debts.
The number of debtors with more than Won500,000 ($534) owed and more than three months arrears on their payments stood at 2.7m at the end of June, down from a peak of 3.72m in 2003. But, according to finance ministry figures, some 7m South Koreans with poor credit ratings also owe about Won18,000bn in total.
Subscribe to:
Posts (Atom)
