Economic BulletinSeptember 2020

September 2020

Vol.42 No.9

Statistical Appendices The Green Book:

Current Economic Trends

Policy Issue

2021 Budget Proposal

Economic News Briefing

Government’s Foreign Bonds Issued Successfully in Dollars and Euros Government Releases Long-term Fiscal Outlook to 2060

National Assembly Approves 4^th Extra Budget

GDP Falls 2.7% in Q2 2020

Korean FDI Posts US $12.14 Billion for Q2 2020

Korea to Launch Korean New Deal Fund

Painted by Jang Seung-eop (1843-1897), owned by Kansong Art and Culture Foundation

The painting depicts an autumn night with a full moon.

A dog is under a large paulownia tree looking at yellow chrysanthemums.

There is a full moon over the tree branch. The dog seems likely to turn around from the flowers and bark at the moon.

Statistical Appendices

53

02 The Green Book: Current Economic Trends

Overview 03

01. External economic situation 04

02. Private consumption 08

03. Facility investment 10

04. Construction investment 12

05. Exports and imports 14

06. Mining and manufacturing production 16

07. Service sector activity 18

08. Employment 20

09. Financial markets 24

9.1 Stock market 24

9.2 Exchange rate 24

9.3 Bond market 25

9.4 Money supply and money market 26

10. Balance of payments 28

11. Prices 30

11.1 Consumer prices 30

11.2 International oil and commodity prices 32

12. Real estate market 34

12.1 Housing market 34

12.2 Land market 36

13. Composite indices of business cycle indicators 37

49 Economic News Briefing

Government’s foreign bonds issued successfully in dollars and euros Government releases long-term fiscal outlooks to 2060

National Assembly approves 4^th extra budget GDP falls 2.7% in Q2 2020

Korean FDI posts US $12.14 billion for Q2 2020 Korea to launch Korean New Deal Fund

39 Policy Issue

2021 budget proposal

Republic of Korea

Economic Bulletin

Editor-in-Chief Suh Joong-Hae (KDI) Kim Yoon-Sang (MOEF) Editorial Board Suk Ran (MOEF) Joo Ho-Sung (KDI) Yu Seong-Im (KDI) Coordinators Kim Dae-Hyun (MOEF) Lee Hyun-Jin (KDI) Editors

Shin Dong-Gyun (MOEF) Park Young-Ji (MOEF) Hwang Hyun-Seong (KDI)

2020

September

THE GREEN BOOK:

CURRENT ECONOMIC TRENDS

Overview

01 External economic situation 02 Private consumption

03 Facility investment 04 Construction investment 05 Exports and imports

06 Mining and manufacturing production 07 Service sector activity

08 Employment 09 Financial markets 10 Balance of payments 11 Prices

12 Real estate market

13 Composite indices of business cycle indicators

Manufacturing and service output continued to improve in July, completed construction works picking up. Retail sales and facilities investment went down.

Industrial production rose 0.1 percent from the previous month in July. Mining and manufacturing improved (up 1.6%, m-o-m and down 2.5%, y-o-y), as well as service output (up 0.3%, m-o-m and down 1.3%, y-o-y). Industrial production fell 1.6 percent year on year.

Retail sales (down 6.0%, m-o-m and up 0.5%, y-o-y) and facilities investment (down 2.2%, m-o-m and up 6.7%, y-o-y) dropped in July. Completed construction works (up 1.5%, m-o-m and down 0.6%, y-o-y) picked up.

Exports fell 9.9 percent year-on-year in August, the fall getting steeper from a 7.1 percent drop in the previous month partly due to fewer days worked (1.5 days). Average daily exports, an indicator calculated according to the days worked, fell from a year ago (US

$1.87 billion (August 2019) → US $1.80 billion (August 2020)).

The consumer sentiment index (CSI) improved 4.0 points in August to 88.2. The business sentiment index (BSI) for the manufacturing sector rose 7 points to 66, and the BSI outlook for September went up 7 points to 68.

The cyclical indicator of the coincident composite index for July increased 0.2 points to 97.2, and the cyclical indicator of the leading composite index improved 0.4 points to 100.3 The economy lost 274,000 jobs year-on-year in August. Job loss slowed from 277,000 of the previous month as service jobs and construction jobs declined at a slower rate. The unemployment rate rose 0.1 percentage points from a year ago to 3.1 percent.

Consumer prices rose 0.7 percent from a year ago in August. Farm product prices soared due to heavy rains. Core inflation rose 0.8 percent.

KOSPI rose in August on expectations of economic recovery at home and abroad. The won strengthened and Korea treasury yields rose on concerns over rising issuance.

Housing prices rose slowly in August (up 0.61% → up 0.47%, m-o-m), and Jeonse (lump- sum deposits with no monthly payments) prices showed a steeper slope (up 0.32% → up 0.44%, m-o-m).

Although the economy showed signs of recovery as exports and manufacturing improve, the recovery has faltered due to strengthened social distancing amid worries over the resurgence of COVID-19.

Major economies’ indicators have been improving, but at a slow rate as the pandemic lingers.

The government will renew its disease prevention efforts and work to support businesses and households hit by social distancing through emergency assistance programs, including those financed by the 4^th extra budget.

Overview

US employment and its other real economic indicators have been improving since May, but the pace became modest in July amid worries over the resurgence of COVID-19.

Personal consumption expenditures in July showed a modest increase and consumer confidence index in August dropped for two consecutive months.

Personal consumption expenditures (m-o-m, %)

0.6 (Jan 2020) → 0.0 (Feb) → -6.7 (Mar) → -12.9 (Apr) → 8.6 (May) → 6.2 (Jun) →1.9 (July)

Consumer confidence index

130.4 (Jan 2020) → 132.6 (Feb) → 118.8 (Mar) → 85.7 (Apr) → 85.9 (May) → 98.3 (Jun) → 91.7 (Jul) → 84.8 (Aug)

The July industrial production posted slower growth, but the ISM manufacturing index reached a 21-month high of 56.0 in August.

Industrial production (m-o-m, %)

-0.4 (Dec 2019) → -0.4 (Jan 2020) → 0.1 (Feb) → -4.3 (Mar) → -12.8 (Apr) → 0.9 (May) → 5.7 (Jun) → 3.0 (July)

ISM manufacturing index (base=50)

47.8 (Dec 2019) → 50.9 (Jan 2020) → 50.1 (Feb) → 49.1 (Mar) → 41.5 (Apr) → 43.1 (May) → 52.6 (Jun) → 54.2 (Jul) → 56.0 (Aug)

The unemployment rate in August dropped to 8.4 percent, a single digit rate for the first time since the outbreak of COVID-19. Jobless claims also fell below one million.

Nonfarm payroll increase (m-o-m, thousand)

251 (Feb 2020) → -1,373 (Mar) → -20,790 (Apr) → 2,730 (May) → 4,780 (Jun) → 1,730 (Jul) → 1,370 (Aug)

Unemployment rate (%)

3.5 (Feb 2020) → 4.4 (Mar) → 14.7 (Apr) → 13.3 (May) → 11.1 (Jun) → 10.2 (Jul) → 8.4 (Aug)

Jobless claims (thousand)

1,435 (4^th week Jul) → 1,186 (5^th week) →971 (1^st week Aug) → 1,104 (2^nd week) → 1,011 (3^rd week) → 881 (4^th week)

In July, new home sales increased 13.9 percent month-on-month (up 36.3%, y-o-y) and existing home sales rose 24.7 percent from the previous month (up 8.7%, y-o-y).

New home sales (m-o-m, %)

5.0 (Dec 2019) → 5.9 (Jan 2020) → -7.5 (Feb) → -14.5 (Mar) → -6.9 (Apr) → 20.5 (May) → 15.1 (Jun) → 13.9 (Jul)

Case-Shiller home price index (m-o-m, %)

0.0 (Dec 2019) → 0.0 (Jan 2020) → 0.5 (Feb) → 1.1 (Mar) → 0.8 (Apr) → 0.4 (May) → 0.2 (Jun)

US

1. External economic situation

(Percentage change from previous period)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Jun Jul Aug

Real GDP¹ 2.3 3.0 2.2 2.9 1.5 2.6 2.4 -5.0 -31.7 - - -

- Personal consumption

expenditures 2.6 2.7 2.4 1.8 3.7 2.7 1.6 -6.9 -34.1 - - -

- Nonresidential

fixed investment 3.7 6.9 2.9 4.2 0.0 1.9 -0.3 -6.7 -26.0 - - -

- Residential

fixed investment 4.0 -0.6 -1.7 -1.7 -2.1 4.6 5.8 19.0 -37.9 - - -

Industrial production 2.3 3.9 0.9 -0.5 -0.6 0.3 0.1 -1.7 -13.2 5.7 3.0 -

Retail sales 4.7 4.4 3.5 0.5 1.8 1.2 0.4 -2.2 -7.2 8.4 1.2 -

Existing home sales 1.7 -3.5 -0.1 1.5 1.9 2.2 0.2 1.2 -21.3 20.2 24.7 -

Unemployment rate² 4.3 3.9 3.7 3.9 3.6 3.6 3.5 3.8 13.0 11.1 10.2 8.4

Consumer prices (y-o-y) 2.1 2.4 1.8 1.6 1.8 1.8 2.0 2.1 0.4 0.6 1.0 -

1. Annualized rate (%) 2. Seasonally adjusted Sources: US Department of Commerce, Bloomberg

US GDP growth and industrial production

-6 -8 -10 -12 -4 -2 0 2 4 6

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(%)

Sources: US Department of Commerce, Federal Reserve Board

GDP (q-o-q, annualized rate) Industrial production (q-o-q)

China’s retail sales decreased from a year ago in July, but strong exports and government spending support the economy.

Fixed asset investment in total (accumulated, y-o-y, %)

-24.5 (Jan-Feb 2020) → -16.1 (Mar) → -10.3 (Apr) → -6.3 (May) → -3.1 (Jun) → -1.6 (Jul)

Fixed asset investment by government and public sector

-23.1 (Jan-Feb 2020) → -12.8 (Mar) → -6.9 (Apr) → -1.9 (May) → 2.1 (Jun) → 3.8 (Jul)

Fixed asset investment by private sector

-26.4 (Jan-Feb 2020) → -18.8 (Mar) → -13.3 (Apr) → -9.6 (May) → -7.3 (Jun) → -5.7 (Jul)

China

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 May Jun Jul

Real GDP 2.2 0.3 0.7 0.7 0.4 0.0 -1.8 -0.6 -7.9 - - -

Industrial production 2.9 1.0 -2.7 -2.1 0.0 -1.1 -3.7 0.4 -16.9 -8.9 1.9 8.0 Retail sales (nominal) 1.2 1.7 0.1 -1.1 0.2 3.3 -6.4 1.6 -7.5 1.9 13.1 -3.3 Exports (y-o-y) 11.8 4.1 -5.6 -3.9 -5.5 -5.0 -7.8 -5.5 -25.3 -28.3 -26.2 -19.2

Consumer prices (y-o-y) 0.5 1.0 0.5 0.3 0.8 0.3 0.5 0.5 0.1 0.1 0.1 0.3

Sources: Japan's Cabinet Office, Ministry of Economy, Trade and Industry, Ministry of Finance, Statistics Bureau of Japan

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

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Jun Jul Aug

Real GDP 6.9 6.7 6.1 6.4 6.2 6.0 6.0 -6.8 3.2 - - -

Industrial production 6.6 6.2 5.7 6.5 5.6 5.0 5.9 -8.4 4.4 4.8 4.8 -

Fixed asset investment

(accumulated, nominal) 7.2 5.9 5.4 6.3 5.8 5.4 5.4 -16.1 -3.1 -3.1 -1.6 - Retail sales (nominal) 10.2 9.0 8.0 8.3 8.5 7.6 7.7 -19.0 -4.0 -1.8 -1.1 -

Exports 7.9 9.9 0.5 1.4 -1.0 -0.3 2.0 -13.3 0.1 0.5 7.2 9.5

Consumer prices¹ 1.6 2.1 2.9 1.8 2.6 2.9 4.3 5.0 2.7 2.5 2.7 2.4

Producer prices¹ 6.3 3.5 -0.3 0.2 0.5 -0.8 -1.2 -0.6 -3.3 -3.0 -2.4 -2.0 1. Quarterly data show an average of monthly data Source: China National Bureau of Statistics

Japan’s industrial production jumped in July, but retail sales decreased after two months of strong gains and unemployment rose as COVID-19 resurged.

Japan’s unemployment (seasonally adjusted, %)

2.2 (Dec 2019) → 2.4 (Jan 2020) → 2.4 (Feb) → 2.5 (Mar) → 2.6 (Apr) → 2.9 (May) → 2.8 (Jun) → 2.9 (Jul)

Japan

China’s GDP growth and fixed asset investment

0 10

-10

-20 20 30 40 50

0 5

-5 10

-10 25

15 20

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(%) (%)

Source: China National Bureau of Statistics

GDP (y-o-y, left) Fixed asset investment (accumulated, y-o-y,right)

Japan’s GDP growth and industrial production

-25 -20 -15 -10 -5 0 5 10 15

-5 -4 -3 -2 -1 0 1 2 3

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(%) (%)

Sources: Japan's Cabinet Office, Ministry of Economy Trade and Industry, Ministry of Finance, Statistics Bureau of Japan GDP (q-o-q, left) Industrial production (q-o-q, right)

Retail sales fell 1.3 percent in July and the PMI in August dropped as COVID-19 resurged and economic uncertainties rose

Eurozone

(Percentage change from same period in previous year)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 May Jun Jul

Real GDP 2.6 1.8 1.3 0.5 0.1 0.3 0.1 -3.7 -11.8 - - -

Industrial production 3.0 0.7 -1.3 0.4 -0.7 -0.8 -1.0 -3.3 -16.0 12.3 9.1 -

Retail sales 2.4 1.6 2.3 0.8 0.5 0.4 0.3 -2.6 -5.2 20.6 5.3 -1.3

Exports (y-o-y) 7.1 4.1 2.8 3.7 2.2 3.3 2.2 -1.7 - 23.5 -29.9 -10.0 -

Consumer prices (y-o-y) 1.5 1.8 1.2 1.4 1.4 1.0 1.0 1.1 0.2 -0.1 0.3 -0.4 Sources: Eurostat, Bloomberg

Eurozone’s GDP growth and industrial production

-10 -8 -6 -4 -2 0 2 4 6

-5 -4 -3 -2 -1 0 1 2 3

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(%) (%)

Source: Eurostat

GDP (q-o-q, left) Industrial production (q-o-q, right)

(Percentage change from previous period)

2017 2018 2019 2020

Annual Annual Q1 Q2 Q3 Q4 Annual¹ Q1¹ Q2¹ Q3¹ Q4¹ Q1¹ Q2¹ Private consumption² 2.8 3.2 1.3 0.3 0.5 0.5 1.7 0.1 0.7 0.4 0.7 -6.5 1.4

(y-o-y) - - 4.1 3.3 2.7 2.7 - 1.4 1.8 1.6 1.9 -4.8 -4.0

1. Preliminary 2. National accounts Source: The Bank of Korea

Private consumption (preliminary GDP) in the second quarter of 2020 increased 1.4 percent from the previous quarter and decreased 4.0 percent compared with a year ago.

Retail sales dropped 6.0 percent in July: Sales of durable goods (down 15.4%), semi-durable goods (down 5.6%) and nondurable goods (down 0.6%) all decreased. The index went up 0.5 percent year-on-year.

2. Private consumption

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2¹ May Jun¹ Jul¹

Retail sales 1.9 4.3 2.4 0.9 0.5 0.3 1.9 -6.4 6.5 4.6 2.3 -6.0

(y-o-y) - - - 1.6 2.0 2.2 3.4 -2.9 1.9 1.7 6.3 0.5

- Durable goods² 5.3 5.7 1.8 0.8 0.1 0.4 5.1 -6.0 18.2 7.8 4.0 -15.4

· Automobiles 0.9 8.2 2.8 -3.4 2.9 4.7 8.0 -15.9 41.6 11.1 5.9 -19.7

- Semi-durable goods³ -1.1 5.8 0.6 -1.0 1.0 -1.5 -1.3 -17.4 11.7 10.7 4.8 -5.6

- Nondurable goods⁴ 1.8 2.9 3.4 1.7 0.6 1.0 1.6 -2.1 -1.0 0.7 0.4 -0.6

1. Preliminary

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

3. Semi-durable goods: Clothing, footwear and etc.

4. Nondurable goods: Food, medicine, cosmetics, fuel, tobacco and etc.

Source: Statistics Korea

(Percentage change from previous period)

2020

Jan Feb Mar Apr May Jun Jul Aug

Car sales at home (y-o-y, %) -15.7 -24.6 13.2 11.6 14.0 44.9 11.7 10.7

Department store sales (y-o-y, %) -0.3 -30.6 -34.6 -14.7 -9.9 0.4 -2.9 -7.7 Large discount store sales (y-o-y, %) 7.3 -19.6 -13.8 -0.9 -9.3 -7.1 -6.2 -2.7

Online sales (y-o-y, %) 17.8 36.5 23.6 19.9 21.9 32.0 22.2 35.5

Credit card spending at home (y-o-y, %) 5.8 6.5 -4.3 -5.7 5.3 9.3 4.8 3.4

Consumer sentiment index 104.2 96.9 78.4 70.8 77.6 81.8 84.2 88.2

Number of Chinese tourists (y-o-y, %) 22.9 -84.7 -98.6 -99.1 -98.8 -98.7 -97.9 -97.1¹ 1. An advance estimate based on all Chinese entries, which can be different from the statistic released by the Ministry of Culture,

Sports and Tourism as it excludes diplomatic and military personnel

Sources: Bank of Korea, Credit Finance Association of Korea, Korea Automobile Manufacturers Association, data provided by retail industries

In August, the consumer sentiment index and online sales increased, but car sales at home and department store sales declined.

Private consumption

-6 -8 -4 -2 0 2 4 6 8

2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1 2015.Q1 2016.Q1 2017.Q1 2018.Q1 2019.Q1 2020.Q1 (%)

Source: Bank of Korea (national accounts)

Private consumption (y-o-y) Private consumption (q-o-q)

Retail sales

-10 -5 0 5 10 15

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(%)

Source: Statistics Korea (industrial activity trends)

Retail sales (y-o-y) Retail sales (m-o-m)

Retail sales by type

-30

-40 -20 -10 0 10 20 30

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(y-o-y, %)

Source: Statistics Korea (industrial activity trends)

Durable goods Semi-durable goods Nondurable goods

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2¹ May Jun¹ Jul¹

Domestic machinery

orders received 18.4 4.8 -0.9 -10.0 -1.8 -6.1 15.3 16.6 1.2 -13.0 18.6 2.3

(q-o-q, m-o-m) - - - -4.7 4.4 0.4 13.7 -1.7 -9.3 -7.2 21.4 -11.8

- Public -22.5 9.5 -6.7 -39.0 -39.3 -48.4 77.2 87.6 138.9 -6.8 350.7 -36.0

- Private 23.2 4.4 -0.4 -7.9 1.1 -3.1 9.2 13.4 -5.3 -13.4 1.9 4.0

Machinery imports 18.8 -0.9 -12.2 -25.5 -13.0 -4.8 -2.4 5.3 6.5 4.7 19.4 8.7 Capacity utilization rate

(% to potential outcome) 73.5 73.8 73.2 71.9 72.3 74.6 74.1 73.5 66.6 63.3 68.2 70.0 Facility investment pressure² 1.2 1.4 0.2 -2.8 -0.4 1.4 2.3 4.4 -6.8 -11.4 -1.9 -3.5 1. Preliminary

2. Production growth rate minus production capacity growth rate in the manufacturing sector (%p) Sources: Statistics Korea, Korea International Trade Association

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

2017 2018 2019 2020

Annual Annual Q1 Q2 Q3 Q4 Annual¹ Q1¹ Q2¹ Q3¹ Q4¹ Q1¹ Q2¹ Facility investment² 16.5 -2.3 4.7 -8.9 -3.3 2.4 -7.5 -8.5 2.6 1.7 2.6 0.2 -0.5

(y-o-y) - - 10.5 -4.4 -9.2 -5.5 - -17.4 -7.0 -2.3 -2.0 7.3 4.1

- Machinery 23.0 -4.2 5.9 -10.9 -7.0 -0.6 -11.5 -6.1 0.4 -1.3 7.1 -2.1 3.1 - Transportation equipment -1.9 4.0 0.2 -1.0 9.4 11.4 5.3 -14.7 8.9 9.6 -8.2 6.6 -9.3 1. Preliminary 2. National accounts Source: Bank of Korea

(Percentage change from previous period)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2¹ May Jun¹ Jul¹ Facility investment index 14.4 -3.6 -6.2 -5.0 3.2 1.0 4.3 -3.0 5.7 -6.5 5.2 -2.2

(y-o-y) - - - -18.7 -6.7 -1.9 3.7 7.0 6.3 3.5 13.8 6.7

- Machinery 20.0 -5.1 -10.6 -5.9 2.8 -2.2 3.6 -0.7 7.4 -2.2 4.5 2.3

- Transportation equipment 0.0 1.2 6.3 -2.7 4.1 9.6 5.8 -8.3 1.4 -16.8 6.9 -14.7 1. Preliminary Source: Statistics Korea

Facility investment (preliminary GDP) in the second quarter of 2020 fell 0.5 percent quarter-on-quarter and rose 4.1 percent year-on-year.

3. Facility investment

The facility investment index fell 2.2 percent month-on-month in July as transportation equipment investment decreased. The index rose 6.7 percent year-on-year.

Capacity utilization rates rose in July, but domestic machinery orders received slowed down, and facility investment pressure continued to fall.

BSI outlook in the manufacturing sector (base=100, Bank of Korea)

72 (Sep 2019) → 73 (Oct) → 72 (Nov) → 71 (Dec) → 73 (Jan 2020) → 77 (Feb) → 69 (Mar) → 54 (Apr) → 50 (May) → 49 (Jun) → 51 (Jul) → 61 (Aug)

Facility investment

-30 -20 -10 0 10 20 30 40

2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1 2015.Q1 2016.Q1 2017.Q1 2018.Q1 2019.Q1 2020.Q1 (%)

Source: Bank of Korea (national accounts)

Facility investment (y-o-y) Facility investment (q-o-q)

Facility investment by type

-30 -20 -10 0 10 20 30 40

2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1 2015.Q1 2016.Q1 2017.Q1 2018.Q1 2019.Q1 2020.Q1 (y-o-y, %)

Source: Bank of Korea (national accounts)

Transportation equipment Machinery

Leading indicators of facility investment

-40 -20 0 20 40 60

2

0 4 6 8 10 12

2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1 2015.Q1 2016.Q1 2017.Q1 2018.Q1 2019.Q1 2020.Q1

(trillion won) (y-o-y, %)

Sources: Statistics Korea (machinery orders), Korea International Trade Association (machinery imports)

Machinery imports (right) Machinery orders (left)

2017 2018 2019 2020 Annual Annual Q1 Q2 Q3 Q4 Annual¹ Q1¹ Q2¹ Q3¹ Q4¹ Q1¹ Q2¹ Construction investment² 7.3 -4.6 1.3 -2.7 -6.9 2.3 -2.5 -0.7 2.9 -6.4 8.0 0.5 -1.5

(y-o-y) - - 0.8 -2.6 -9.1 -6.4 - -8.1 -3.0 -2.7 2.6 4.2 -0.1

- Building construction 12.4 -5.4 -0.1 -3.0 -6.2 2.2 -5.6 -1.3 -1.0 -5.6 6.2 0.5 -4.5 - Civil engineering works -4.7 -2.7 5.2 -1.9 -8.8 2.7 5.8 0.8 13.1 -8.3 12.4 0.3 5.3 1. Preliminary 2. National accounts Source: Bank of Korea

(Percentage change from previous period)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2¹ May¹ Jun¹ Jul¹ Construction completed

(constant) 11.4 -4.2 -6.9 1.0 -1.8 -3.5 1.0 4.1 -4.6 -3.7 -0.4 1.5

(y-o-y) - - - -10.2 -6.8 -8.2 -2.9 0.3 -3.8 -5.3 -3.6 -0.6

- Building construction 19.4 -2.8 -9.7 1.1 -4.3 -4.9 -0.3 3.6 -5.2 -1.7 0.3 0.0 - Civil engineering works -6.7 -8.1 1.5 0.7 5.7 0.4 4.5 5.2 -3.0 -8.3 -2.3 5.0 1. Preliminary Source: Statistics Korea

(Percentage change from previous period)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Q4 Q1 Q2¹ May¹ Jun¹ Jul¹ Construction orders received

(current value) -1.7 0.2 6.2 -5.5 2.0 2.6 20.9 1.7 21.6 34.0 75.7 81.5

(q-o-q, m-o-m) - - - 0.7 -2.4 -3.1 28.2 -15.7 17.5 63.3 21.6 -9.1

- Building construction -4.7 -5.0 6.4 -5.3 5.5 7.8 14.4 16.1 25.9 41.7 83.7 64.2 - Civil engineering works 9.6 17.3 5.7 -6.1 -10.5 -7.1 40.9 -30.9 3.4 3.2 45.7 149.2 Building permits² -4.0 -6.3 -10.4 -12.6 -18.3 -12.2 1.9 -19.0 7.2 12.8 17.4 12.7

Apartment presales (thousand)³ 327 297 342 53 93 76 120 40 93 28 48 46

1. Preliminary 2. Floor area 3. Number of apartments sold for the period

Sources: Statistics Korea, Ministry of Land, Infrastructure and Transport, Real Estate 114

(Percentage change from same period in previous year, housing units)

Construction investment (preliminary GDP) in the second quarter of 2020 fell 1.5 percent quarter-on-quarter and 0.1 percent year-on-year.

4. Construction investment

Construction completed (constant) rose 1.5 percent month-on-month in July as civil engineering works increased. The index fell 0.6 percent year-on-year.

Construction orders received and building permits rose in July, but apartment presales edged down. SOC investment is expected to increase over 2020.

Government SOC budgets (trillion won) 19.0 (2018) → 19.8 (2019) → 23.2 (2020)

Construction investment

-10

-15 -5 0 5 10 15

2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1 2015.Q1 2016.Q1 2017.Q1 2018.Q1 2019.Q1 2020.Q1 (%)

Source: Bank of Korea (national accounts)

Construction investment (y-o-y) Construction investment (q-o-q)

Construction investment by type

-30 -20 -10 0 10 20 30 40

2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1 2015.Q1 2016.Q1 2017.Q1 2018.Q1 2019.Q1 2020.Q1 (y-o-y, %)

Source: Bank of Korea (national accounts)

Building construction Residential buildings Civil engineering works

Leading indicators of construction investment

-100 -50 0 50 100 150 200

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(y-o-y, %)

Sources: Statistics Korea (construction orders), Ministry of Land, Infrastructure and Transport (building permit area)

Construction orders Building permit area

(US $ billion)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Aug Q4 Q1 Q2 Jul Aug¹

Exports 573.69 604.86 542.22 132.65 138.49 134.73 44.02 136.36 130.24 110.40 42.83 39.66 (y-o-y, %) 15.8 5.4 -10.4 -8.5 -8.7 -12.3 -14.0 -11.8 -1.8 -20.3 -7.1 -9.9 Average daily exports 2.13 2.24 1.99 2.03 2.02 1.95 1.87 1.96 1.92 1.65 1.71 1.80 1. Preliminary Source: Korea Customs Service

(US $ billion)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Aug Q4 Q1 Q2 Jul Aug¹

Imports 478.48 535.20 503.34 123.80 128.77 124.96 42.46 125.81 121.86 107.98 38.69 35.54 (y-o-y, %) 17.8 11.9 -6.0 -6.5 -3.3 -4.1 -4.3 -9.7 -1.6 -16.1 -11.6 -16.3 Average daily imports 1.78 1.98 1.85 1.89 1.88 1.81 1.81 1.81 1.79 1.61 1.55 1.62 1. Preliminary Source: Korea Customs Service

Exports (preliminary) decreased 9.9 percent year-on-year to US $39.66 billion in August.

By item, computers, home appliances and semiconductors rose, while petroleum products, vessels, auto parts and wireless communications devices fell. By region, shipments to major economies all declined, but average daily exports to China, the US and the EU increased.

Export growth by item (y-o-y, %)

107 (computers), 15 (home appliances), 3 (semiconductors), -27 (auto parts), -32 (wireless communications devices), -32 (vessels), -44 (petroleum products)

Export growth by region (y-o-y, %)

-0.4 (US), -3 (China), -3 (EU), -18 (ASEAN countries), -21 (Japan), -21 (Middle East), -24 (CIS countries), -30 (Latin America), -33 (India)

Average daily exports, an indicator calculated according to the days worked, fell 3.8 percent year-on-year to US $1.80 billion.

Growth in average daily exports (y-o-y, %)

4.2 (Jan 2020) → -12.5 (Feb) → -7.8 (Mar) → -18.8 (Apr) → -18.4 (May) → -18.4 (Jun) → -7.1 (Jul)

5. Exports and imports

Imports (preliminary) in August fell 16.3 percent year-on-year to US $35.54 billion.

Imports of consumer goods and commodities fell, and capital goods imports continued to increase.

Import growth by category (y-o-y, %, Jul → Aug)

-7.6 → -3.8 (consumer goods), -25.6 → -33.3 (commodities), 7.2 → 4.4 (capital goods)

(US $ billion)

2017 2018 2019 2020

Annual Annual Annual Q1 Q2 Q3 Aug Q4 Q1 Q2 Jul Aug¹

Trade balance 95.22 69.66 38.89 8.86 9.72 9.77 1.56 10.54 8.38 2.42 4.13 4.12 1. Preliminary Source: Korea Customs Service

The trade balance (preliminary) posted a surplus of US $4.12 billion in August.

Exports by item

-80 -60 -40 -20 0 20 40 60 80 100 120 140

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(y-o-y, %)

Sources: Korea Customs Service, Ministry of Trade, Industry and Energy (export and import trends)

Export growth rate Automobiles Semiconductors Steel

Imports by category

-80 -60 -40 -20 0 20 40 60 80 100

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(y-o-y, %)

Sources: Korea Customs Service, Ministry of Trade, Industry and Energy (export and import trends)

Import growth rate Commodities Capital goods

(Percentage change from the previous period, %)

2019 2020

Annual Q2 Jul Q1 Q2¹ May Jun¹ Jul¹

Mining and manufacturing²

(q-o-q, m-o-m) - 1.4 2.3 0.1 -7.1 -7.0 7.2 1.6

(y-o-y) -0.1 -0.3 1.6 5.1 -5.1 -9.7 -0.5 -2.5

Manufacturing

Production (q-o-q, m-o-m) - 1.5 2.4 0.1 -7.4 -7.0 7.4 1.8

(y-o-y) 0.1 -0.6 1.9 5.5 -5.2 -9.9 -0.5 -2.4

Inventory³ -2.9 -1.6 2.4 4.6 -1.3 -0.1 -1.0 0.2

Shipments -0.6 0.0 1.5 -2.0 -6.5 -6.8 8.1 1.6

Average operation ratio 73.2 72.3 74.5 73.5 66.5 63.3 68.2 70.0

Production capacity (y-o-y) -0.1 -0.2 -0.6 1.1 1.6 1.5 1.4 1.1

1. Preliminary

2. Including mining, manufacturing, and electricity and gas supply 3. End-period

Source: Statistics Korea

Mining and manufacturing rose 1.6 percent month-on-month in July as manufacturing continued to improve. Mining declined, as well as gas and electricity production. Year-on- year, the index went down 2.5 percent.

Compared to the previous month, automobiles (up 14.4%), mechanical equipment (up 6.0%), and rubber and plastics (up 8.4%) rose, while semiconductors (down 4.8%), electronic components (down 6.6%) and nonmetallic minerals (down 4.8%) declined.

Compared to a year ago, semiconductors (up 17.2%), mechanical equipment (up 9.3%) and medicines (up 23.9%) rose, while automobiles (down 9.3%), primary metals (down 13.8%) and electronic components (down 18.0%) declined.

The manufacturing inventory-shipment ratio fell 1.7 percentage points month-on-month to 116.0 percent as inventories increased 0.2 percent and shipments rose 1.6 percent.

Inventories of semiconductors (up 13.0%), broadcasting and communications equipment (up 16.9%), and mechanical equipment (up 3.0%) rose, while chemical products (down 4.4%), primary metals (down 3.6%) and electronic components (down 15.5%) declined.

Shipments of automobiles (up 10.5%), mechanical equipment (up 6.6%), and rubber and plastics (up 9.1%) rose.

The average operation ratio of the manufacturing sector improved 1.8 percentage points from the previous month to 70.0 percent.

6. Mining and manufacturing production

Mining and manufacturing

Industrial production

-30 -20 -10 0 10 20 30 40 50

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(%)

Source: Statistics Korea (industrial activity trends)

Industrial production (y-o-y) Industrial production (m-o-m)

Shipment and inventory

-6 -8 -4 -2 0 2 4 6 8 10

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(m-o-m, %)

Source: Statistics Korea (industrial activity trends)

Shipment growth Inventory growth

Capacity utilization rate

60 65 70 75 80 85 90

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(%)

Source: Statistics Korea (industrial activity trends)

(Percentage change from previous period)

Weight2018 2019 2020

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2¹ May Jun¹ Jul¹ Service activity index 100.0 2.3 1.4 0.3 0.3 0.6 0.7 -3.0 -1.5 2.4 2.2 0.3

- Wholesale & retail 21.1 1.7 -0.4 -0.6 -0.3 0.5 -0.3 -3.8 -0.1 3.8 2.2 -1.4 - Transportation & storage services 9.0 2.1 0.0 -0.4 -0.3 0.6 -0.6 -9.1 -10.3 1.8 2.6 1.2 - Hotels & restaurants 6.2 -1.9 -1.0 -0.8 0.4 -1.2 2.0 -17.3 -0.4 14.2 1.4 2.3 - Information & communications services 8.0 2.2 3.5 4.0 0.5 0.3 0.4 3.1 -1.7 0.8 -4.6 2.2 - Financial & insurance services 14.1 5.9 1.7 0.3 0.6 1.4 -0.1 6.7 3.3 0.7 2.8 2.2 - Real estate & renting 3.2 0.2 0.3 -1.3 -0.9 2.9 4.6 3.4 -4.3 0.3 6.2 1.8 - Professional, scientific & technical services 7.1 0.9 1.4 -0.9 0.9 0.2 0.5 0.5 -2.2 0.6 5.7 -2.1

- Business services 4.8 0.8 2.2 0.0 1.7 -0.5 3.1 -9.2 -6.0 1.0 0.7 0.4

- Education services 10.6 -0.1 -0.5 -0.2 -0.6 0.1 -0.1 -4.5 -0.7 0.8 5.3 -1.7 - Healthcare & welfare services 9.4 5.6 8.1 1.8 1.7 2.9 1.7 -2.5 0.0 0.5 -0.1 0.5 - Entertainment & leisure 2.2 -0.6 1.2 2.6 -1.4 -1.4 3.2 -20.7 -27.1 9.5 10.7 7.7 - Membership organizations & personal

services 3.2 0.8 -1.5 -1.0 0.0 -1.3 1.4 -9.4 2.4 10.0 2.9 -4.2

- Sewerage & waste management 1.1 3.1 -0.4 -2.4 0.2 3.3 1.1 2.6 -3.9 1.5 1.3 -1.3 1. Preliminary

Source: Statistics Korea

2020

Jan Feb Mar Apr May Jun Jul Aug

Highway traffic (y-o-y, %) 3.3 -4.9 -11.7 -6.5 -3.0 1.0 0.3 -5.5

Department store sales (y-o-y, %) -0.3 -30.6 -34.6 -14.7 -9.9 0.4 -2.9 -7.7 Large discount store sales (y-o-y, %) 7.3 -19.6 -13.8 -0.9 -9.3 -7.1 -6.2 -2.7

Online sales (y-o-y, %) 17.8 36.5 23.6 19.9 21.9 32.0 22.2 35.5

Daily stock transactions (trillion won)¹ 11.9 14.2 18.5 20.8 20.2 24.0 23.9 31.0 Number of Chinese tourists (y-o-y, %) 22.9 -84.7 -98.6 -99.1 -98.8 -98.7 -97.9 -97.1² 1. Average

2. An advance estimate based on all Chinese entries, which can be different from the statistic released by the Ministry of Culture, Sports and Tourism as it excludes diplomatic and military personnel

Sources: Korea Expressway Corporation, Korea Exchange data provided by retail industries

Service output increased 0.3 percent month-on-month in July. Hotels & restaurants, entertainment & leisure, financial & insurance services and information & communications services increased. Compared to a year ago, the index fell 1.4 percent.

7. Service sector activity

In August, department store sales and large discount store sales continued to decline, as well as highway traffic.

Service sector activity

-4 -6 -8 -2 0 2 4 6 8 10

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(%)

Source: Statistics Korea (industrial activity trends)

Service sector activity (y-o-y) Service sector activity (m-o-m)

Wholesale & retail

-6 -8 -10 -4 -2 0 2 4 6 8 10

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 2019.1 2020.1

(%)

Source: Statistics Korea (industrial activity trends)

Wholesale & retail (y-o-y) Wholesale & retail (m-o-m)

July 2020 service output by business

0 5 20 15 10

-20 -25 -15 -5 -10

-30 -35

Financial

& insurance services

Professional, scientific

& technical services

Education

services Entertainment

& leisure

Sewerage

& waste management Wholesale

& retail Total index

Hotels

& restaurants Transportation

& storage services

Publishing &

communications services

Real estate

& renting

Business services

Healthcare &

social welfare

services Membership

organizations

& personal services (y-o-y, %)

Source: Statistics Korea (industrial activity trends)