the south korean economy 2018 trends … › fileadmin › ahk_korea › mitglieder › ...2014 2015...

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


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



-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



-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



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



-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



-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


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



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 *)




*) 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)



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


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 *)



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 *)



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)



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!



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


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 *)


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!



-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



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



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



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



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


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



-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



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 %)



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 %)



-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



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



-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



-5

0

5

10

15

20

25

30

35

40

45

RoadVehiclesSITC 78

Mach.Spec. SITC

72

Chem.Materials

SITC SITC 59


71

MachineryGen. SITC

74

OrganicChemicals

SITC 51

ScientificApparatus

SITC 87

Electr.Machinery

SITC 77


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



-5

0

5

10

15

20

25

30

35

40

45

RoadVehiclesSITC 78

Mach. Spec.SITC 72

Chem.Materials

SITC SITC 59


71

MachineryGen. SITC

74

OrganicChemicals

SITC 51

ScientificApparatus

SITC 87

Electr.Machinery

SITC 77


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


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?

+/-


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)

-


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.


Contact Information

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© Germany Trade & Invest

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Sorgfalt erstellt. Für die Richtigkeit können wir jedoch keine Haftung übernehmen.

Berlin

Friedrichstraße 60

10117 Berlin

Germany

T. +49 30 200 099-0

F. +49 30 200 099-111

www.gtai.de

Bonn

Villemombler Str. 76

53123 Bonn

Germany

T. +49 228 249 93-0

F. +49 228 249 93-212

www.gtai.de

Seoul Office

Alexander Hirschle, Director

8th Fl. Shinwon Plaza Building

85 Dokseodang-ro, Yongsan-gu

Seoul 140-884, Korea

T. +82 (02) 797-7442

F. +82 (02) 795-7456

[email protected]

the south korean economy 2018 trends … › fileadmin › ahk_korea › mitglieder › ...2014 2015...

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