Economic Bulletin

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Republic of Korea

Economic Bulletin

January 2019

Vol.41 No.1

The Green Book:

Current Economic Trends

Economic News Briefing

Korea to Promote a Sharing Economy Government Frontloads 61% of Project Budget in H1 2019

Korea’s Exports Hit Record High in 2018 Inbound FDI Up 17.2% in 2018

Policy Issue

Government Unveils Its Hydrogen Economy Roadmap

Statistical Appendices

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03

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 9.1 Stock market 9.2 Exchange rate 9.3 Bond market

9.4 Money supply and money market 10 Balance of payments

11 Prices

11.1 Consumer prices

11.2 International oil and commodity prices 12 Real estate market

12.1 Housing market 12.2 Land market

13 Composite indices of business cycle indicators

The Green Book

Current Economic Trends

eb.kdi.re.kr ISSN 2287-7266

Editor-in-Chief Suh Joong-Hae (KDI) Yoon Tae-Sik (MOEF) Editorial Board Suk Ran (MOEF) Lee Jae-Yeal (KDI) Yu Seong-Im (KDI) Coordinators Kim Dae-Hyun (MOEF) Lee Hyun-Jin (KDI) Editors

Shin Dong-Gyun (MOEF) Lee Ji-Youn (KDI)

Haeundae

Haeundae is a famous beach resort in eastern Busan, the second largest city in Korea, and has been a venue for the regularly held Busan International Film Festival (BIFF) since 1996. Centum City, a large business and leisure complex with exhibition halls, shopping centers and other entertainment facilities, is one of the major features of Haeundae.

43

Government unveils its hydrogen economy roadmap

Policy Issue

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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 9.1 Stock market 9.2 Exchange rate 9.3 Bond market

9.4 Money supply and money market 10 Balance of payments

11 Prices

11.1 Consumer prices

11.2 International oil and commodity prices 12 Real estate market

12.1 Housing market 12.2 Land market

13 Composite indices of business cycle indicators

46

Korea to promote a sharing economy

Government frontloads 61% of project budget in H1 2019

BOK forecasts 2.6% growth for 2019 Korea’s exports hit record high in 2018 Inbound FDI up 17.2% in 2018

Economic News Briefing

49

01 National accounts

02 Production, shipment and inventory 03 Production capacity and operation ratio 04 Consumer goods sales index

05 Machinery orders received and facility in vestment index

06 Value of construction completed and domestic construction orders received

07 Composite indices of business cycle indicators, CSI and BSI

08 Prices 09 Employment (I) 10 Employment (II) 11 Balance of payments (I) 12 Balance of payments (II) 13 Financial indicators 14 Monetary indicators 15 Exchange rates

Statistical Appendices

Vol.41

January

2019

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Green The

CurrenT eConomiC Trends Book

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

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Retail sales improved for the second consecutive month in November, however industrial activities fell. Investment and employment remain weak, and concerns have been rising over a pessimistic outlook for semiconductor manufacturing. External uncertainties linger amid ongoing trade conflicts between the US and China.

The economy added 34,000 jobs year-on-year in December as job growth slowed in services and construction. Manufacturing jobs continued to fall.

Young adult unemployment declined in December (9.2% → 8.6%, down 0.6%p, y-o-y). Employment in 2018 increased by 97,000.

Consumer price inflation slowed in December (up 2.0% → up 1.3%, y-o-y) as oil product prices fell and fresh food prices became stable. Consumer prices rose 1.5 percent in 2018.

All industry production fell in November (up 0.8% → down 0.7%, m-o-m):

Mining and manufacturing production decreased (up 1.3% → down 1.7%, m-o-m) due to weak manufacturing and gas & electricity production. Service output declined (up 0.6% → down 0.2%, m-o-m), as financial & insurance services, as well as real estate & renting, fell. Wholesale & retail improved.

Retail sales continued to increase in November (up 0.2% → up 0.5%, m-o-m) backed by strong durable goods sales. Sales of durable goods and nondurable goods increased 3.3 percent and 1.1 percent, respectively. Semi-durable goods sales dropped 3.8 percent.

Facility investment fell in November (up 2.2% → down 5.1%, m-o-m) as both machinery and transportation equipment declined. Construction completed continued to fall (down 1.8% → down 0.9%, m-o-m) due to weak building construction.

In November, the cyclical indicator of the coincident composite index fell 0.2 points to 98.2, and the cyclical indicator of the leading composite index fell 0.2 points to 98.6.

Exports fell in December (up 4.1% → down 1.2%, y-o-y), despite strong cars and vessels, as home electronics and smartphones decreased. Annual exports surpassed US $600 billion in 2018 for the first time.

In December KOSPI fell amid growing uncertainties about the Chinese economy. The dollar-won exchange rate fell on expectations that Fed might slow down its rate hikes. Government bond yields went down.

Overview

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The global economy has been growing, but there are risks with regard to ongoing trade conflicts, Fed’s rate hikes and financial market volatility in emerging economies.

World GDP growth

1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17

(%)

due to falling prices in areas outside the Seoul metropolitan area. Jeonse (lump-sum deposits with no monthly payments) prices continued to fall (down 0.09% → down 0.19%, m-o-m) as the prices declined in both the Seoul metropolitan area and other areas.

The economy is expected to improve given expansionary fiscal policies and strong consumption, but job markets are weak and there are external uncertainties, such as those regarding US-China trade conflicts, Fed’s rate hikes and volatility in global financial markets.

The government will strengthen its risk management and work to boost the economy by implementing the measures to achieve industrial innovation, create jobs and support low-income households and small merchants. The government will work to fast implement the 2019 economic policies, which have drawn to help achieve an inclusive and dynamic economy.

source: international monetary Fund

1. External economic situation

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The US economy has continued to recover, industrial production improving, as well as retail sales and the labor market.

Industrial production rose 0.6 percent month-on-month in November due to the strong production of mining (up 1.7%, m-o-m) and public utilities (up 3.3%, m-o-m). The ISM Manufacturing Index rose in the month.

ISM Manufacturing Index (base=50)

58.1 (Jul 2018) → 61.3 (Aug) → 59.8 (Sep) → 57.7 (Oct) → 59.3 (Nov)

US

US GDP growth and industrial production

-6 -4 -2 0 2 4 6

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

GdP (q-o-q, annualized rate) industrial production (q-o-q)

sources: us department of Commerce, Federal reserve Board

Retail sales rose 0.2 percent month-on-month in November as automobile sales continued to improve (up 0.2%, m-o-m), as well as nonstore retailer sales (up 2.3%, m-o-m). Consumer confidence dropped in December.

Conference Board Consumer Confidence Index (1985=100)

127.9 (Jul 2018) → 134.7 (Aug) → 135.3 (Sep) → 137.9 (Oct) → 136.4 (Nov) → 128.1 (Dec)

Existing home sales increased 1.9 percent month-on-month in November to an annual rate of 5,320,000 homes (down 7.0%, y-o-y). New home sales fell 8.9 percent month-on-month in October to an annual rate of 540,000 units (down 12.0%, y-o-y).

Case-Shiller Home Price Index (y-o-y, %)

6.5 (May 2018) → 6.4 (Jun) → 5.9 (Jul) → 5.5 (Aug) → 5.2 (Sep) → 5.0 (Oct)

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

3.2 (May 2018) → -6.3 (Jun) → -1.0 (Jul) → -2.5 (Aug) → 1.0 (Sep) → -8.9 (Oct)

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(Percentage change from previous period)

2016 2017 2018

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 oct nov dec

Real GDP¹ 1.6 2.2 1.8 3.0 2.8 2.3 2.2 4.2 3.5 - - -

- Personal consumption expenditures 2.7 2.5 1.8 2.9 2.2 3.9 0.5 3.8 4.0 - - - - Nonresidential fixed investment 0.5 5.3 9.6 7.3 3.4 4.8 11.5 8.5 0.8 - - - - Residential fixed investment 6.5 3.3 11.1 -5.5 -0.5 11.1 -3.4 -1.6 -4.0 - - - Industrial production -1.9 1.6 0.2 1.2 -0.4 1.9 0.6 1.3 1.2 -0.2 0.6 -

Retail sales 2.9 4.7 1.5 0.6 1.0 2.3 0.4 1.8 1.1 1.1 0.2 -

Existing home sales 4.1 1.7 1.0 -1.0 -2.6 3.5 -1.5 -1.7 -2.6 1.4 1.9 - Unemployment rate² 4.9 4.4 4.7 4.3 4.3 4.1 4.1 3.9 3.8 3.7 3.7 3.9 Consumer prices (y-o-y) 1.3 2.1 2.6 1.9 2.0 2.1 2.3 2.6 2.6 2.5 2.2 - 1. Annualized rate (%)

2. seasonally adjusted

sources: us department of Commerce, Bloomberg

60.6 percent. The unemployment rate rose somewhat to 3.9 percent.

Labor force participation rate (%)

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

165 (Jul 2018) → 286 (Aug) → 119 (Sep) → 237 (Oct) → 155 (Nov) → 312 (Dec)

Unemployment rate (%)

4.0 (Jun 2018) → 3.9 (Jul) → 3.9 (Aug) → 3.7 (Sep) → 3.7 (Oct) → 3.7 (Nov) → 3.9 (Dec)

US nonfarm payroll growth and unemployment rate

0 2 4 6 8 10 12

-1,000 -800 -600 -400 -200 0 200 400 600

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (thousands)

unemployment rate (right)

unemployment rate (left)

source: us department of Labor

(%)

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(Percentage change from same period in previous year)

2016 2017 2018

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 sep oct nov

Real GDP 6.7 6.9 6.9 6.9 6.8 6.8 6.8 6.7 6.5 - - -

Industrial production 6.0 6.6 6.8 6.9 6.3 6.2 6.1 6.6 6.0 5.8 5.9 5.7 Fixed asset investment

(accumulated, nominal) 8.1 7.2 9.2 8.6 7.5 7.2 7.5 6.0 5.4 5.4 5.7 5.9 Retail sales (nominal) 10.4 10.2 10.2 10.8 10.3 9.9 9.7 9.0 9.0 9.2 8.6 8.1

Exports -6.6 6.5 3.2 6.6 6.1 9.4 13.7 11.5 11.8 14.4 15.5 5.4

Consumer prices¹ 2.0 1.6 1.4 1.4 1.6 1.8 2.2 1.8 2.3 2.5 2.5 2.2 Producer prices¹ -1.3 6.3 7.4 5.8 6.2 5.9 3.7 4.1 4.1 3.6 3.3 2.7 1. Quarterly data show an average of monthly data

source: China national Bureau of statistics

China’s GDP growth and fixed asset investment

0 10 20 30 40 50

4 6 8 10 12 14

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

GdP (y-o-y, left)

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

source: China national Bureau of statistics

(%)

The Chinese economy showed signs of a slowdown in November as exports, industrial production and retail sales grew at a slower rate. Fixed asset investment continued to improve.

China

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

GdP (q-o-q, left)

industrial production (q-o-q, right)

sourced: Japan's Cabinet office, ministry of economy Trade and industry, ministry of Finance, statistics Bureau of Japan (%)

Japan’s economy slowed in November: Industrial production and retail sales fell, and export growth weakened.

Unemployment rate (%)

2.4 (Jun 2018) → 2.5 (Jul) → 2.4 (Aug) → 2.3 (Sep) → 2.4 (Oct) → 2.5 (Nov)

Japan

2016 2017 2018

Real GDP 1.0 1.7 0.7 0.5 0.6 0.2 -0.2 0.7 -0.6 - - -

Industrial production -0.2 4.5 0.2 1.8 0.4 1.6 -1.3 1.3 -1.7 -0.4 2.9 -1.1 Retail sales (nominal) -0.6 1.9 -0.2 0.6 0.1 1.3 -0.6 0.4 1.1 0.1 1.3 -1.0 Exports (y-o-y) -7.4 11.8 8.5 10.5 15.1 13.0 4.9 7.5 2.9 -1.3 8.2 0.1 Consumer prices (y-o-y) -0.1 0.5 0.3 0.4 0.6 0.6 1.3 0.7 1.1 1.2 1.4 0.8 sources: Japan's Cabinet office, ministry of economy, Trade and industry, ministry of Finance, statistics Bureau of Japan

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2016 2017 2018

Real GDP 1.9 2.4 0.6 0.7 0.7 0.7 0.4 0.4 0.2 - - -

Industrial production 1.6 2.9 0.0 1.0 1.6 1.3 -0.6 0.1 -0.1 -0.6 0.2 -

Retail sales 1.6 2.3 0.3 0.8 0.4 0.4 0.8 0.8 -0.1 -0.5 0.6 0.6

Exports (y-o-y) 0.3 7.1 11.2 5.4 6.0 6.2 2.1 4.3 4.6 -0.8 11.4 - Consumer prices (y-o-y) 0.2 1.5 1.8 1.5 1.4 1.4 1.3 1.7 2.1 2.1 2.2 1.9 sources: eurostat, Bloomberg

Eurozone’s GDP growth and industrial production

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

-4 -3 -2 -1 0 1 2

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

GdP (q-o-q, left)

industrial production (q-o-q, right)

source: eurostat

(%)

Eurozone’s industrial production and retail sales picked up in October, and the unemployment rate stayed stable at 8.1, the lowest since December 2012.

Unemployment rate (%)

8.4 (Apr 2018) → 8.2 (May) → 8.2 (Jun) → 8.2 (Jul) → 8.1 (Aug) → 8.1 (Sep) → 8.1 (Oct)

Manufacturing PMI

Eurozone Economic Sentiment Indicator (base 2010=100)

112.1 (Jul 2018) → 111.6 (Aug) → 110.9 (Sep) → 109.7 (Oct) → 109.5 (Nov)

Eurozone

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2016 2017 2018

Annual Q1 Q2 Q3 Q4 Annual¹ Q1¹ Q2¹ Q3¹ Q4¹ Q1¹ Q2¹ Q3¹ Private consumption² 2.5 -0.2 0.8 0.5 0.3 2.6 0.5 1.0 0.8 1.0 0.7 0.3 0.5

(y-o-y) - 2.4 3.6 2.8 1.4 - 2.1 2.4 2.6 3.4 3.5 2.8 2.5

1. Preliminary 2. national accounts source: The Bank of korea

Private consumption

-6 -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 (%)

Private consumption (y-o-y)

Private consumption (q-o-q)

source: Bank of korea (national accounts)

Private consumption (preliminary GDP) in the third quarter of 2018 rose 0.5 percent from the previous quarter and 2.5 percent compared with a year ago.

Retail sales in November rose 0.5 percent from the previous month: Sales of durable goods (up 3.3%) and nondurable goods (up 1.1%) rose, and sales of semi-durable goods (down 3.8%) declined. Year-on-year, the index rose 1.0 percent.

2. Private consumption

2016 2017 2018

Annual Q4 Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3¹ oct¹ nov¹

Retail sales 3.9 1.4 1.9 0.4 1.0 0.2 0.9 3.0 0.7 -0.5 0.2 0.5

(y-o-y) - 2.2 - 1.6 1.0 3.2 2.1 5.0 4.7 3.9 5.1 1.0

- Durable goods² 4.6 6.5 5.4 1.0 5.2 -3.0 1.4 5.4 2.2 -4.7 1.5 3.3 · Automobiles 2.8 16.5 0.9 -0.5 3.5 -6.9 1.4 11.0 3.8 -8.6 7.1 3.7 - Semi-durable goods³ 2.3 -0.1 -1.1 -1.3 -0.5 1.1 1.4 2.8 1.0 2.2 0.5 -3.8 - Nondurable goods⁴ 4.2 -0.3 1.7 0.8 -0.5 1.4 0.5 2.1 -0.3 0.5 -0.6 1.1 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

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2018

may Jun Jul Aug sep oct nov dec¹

Credit card use (y-o-y, %) 5.2 7.7 9.7 8.8 1.9 13.2 6.7 7.1

Department store sales (y-o-y, %) 2.0 5.0 3.2 2.9 4.3 3.9 -3.4 0.5 Large discount store sales (y-o-y, %) -3.0 0.9 -2.5 2.0 7.5 -12.2 -1.7 -3.6 Domestic sales of cars (y-o-y, %) -0.3 -5.9 3.3 6.8 -18.7 23.1 -0.4 3.3 Consumer sentiment index 107.9 105.5 101.0 99.2 100.2 99.5 96.0 97.2 Number of Chinese tourists (y-o-y, %) 46.1 49.0 45.9 41.0 36.4 37.7 41.1 37.9² 1. Preliminary 2. Advanced estimates 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 national oil Corporation, korea Automobile manufacturers Association, data provided by retail industries

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 (%)

retail sales (y-o-y)

retail sales (m-o-m)

source: statistics korea (industrial activity trends)

Retail sales by type

-15 -10 -5 0 5 10 15 20 25 30

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (%)

durable goods semi-durable goods nondurable goods

In December sales at department stores and domestic sales of cars increased,

as well as credit card use and consumer confidence. Sales at large discount

stores fell.

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Facility investment (preliminary GDP) in the third quarter of 2018 fell 4.4 percent quarter-on-quarter and 7.4 percent year-on-year.

2016 2017 2018

Annual Annual¹ Q1¹ Q2¹ Q3¹ Q4¹ Q1¹ Q2¹ Q3¹

Facility investment² -1.0 14.6 4.5 4.3 0.2 -0.7 3.4 -5.7 -4.4

(y-o-y) - - 16.1 17.9 16.3 8.6 7.3 -3.0 -7.4

- Machinery -0.8 23.0 7.1 3.9 2.4 -1.2 4.0 -4.5 -9.5

- Transportation equipment -1.5 -3.2 -1.7 5.3 -5.5 0.8 1.9 -9.3 10.6 1. Preliminary 2. national accounts source: Bank of korea

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 (%)

Facility investment (y-o-y)

Facility investment (q-o-q)

3. Facility investment

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 (y-o-y, %)

Transportation equipment

machinery

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2016 2017 2018

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 oct¹ nov¹ Domestic machinery orders

received 4.7 19.2 21.1 23.7 31.3 4.2 4.4 -0.4 0.0 8.0 -21.0

(q-o-q, m-o-m) - - -8.6 11.4 1.4 0.3 -8.9 7.2 1.8 8.5 -14.2

-Public 49.0 -21.8 8.4 -5.8 -0.9 -54.0 -12.7 18.9 8.2 38.9 -32.1

-Private 1.1 24.1 22.5 26.3 34.1 15.0 6.1 -1.7 -0.6 5.7 -20.5

Machinery imports -2.5 18.8 24.2 20.5 22.7 9.1 21.0 -1.2 -13.2 13.0 -12.5 Capacity utilization rate 72.9 72.6 73.5 72.0 73.0 71.8 71.0 73.2 74.2 73.8 72.7 Facility investment pressure² -0.4 0.5 2.6 0.2 3.9 -4.7 -2.5 1.5 -0.8 13.1 1.9 1. Preliminary 2. Production growth rate minus production capacity growth rate in the manufacturing sector (%p) sources: statistics korea, korea international Trade Association

2016 2017 2018

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 oct^¹ nov^¹

Facility investment index -1.3 14.1 6.0 3.1 0.2 -1.7 8.4 -11.0 -6.2 2.2 -5.1

(y-o-y) - - 18.2 17.8 20.6 2.0 9.4 -5.9 -13.6 9.4 -10.0

- Machinery -2.2 22.4 6.6 7.9 -0.1 -2.0 5.3 -9.5 -10.1 -0.8 -6.1 - Transportation equipment 0.9 -4.4 5.1 -8.7 0.4 -0.8 17.8 -15.5 4.8 10.0 -3.1 1. Preliminary source: statistics korea

Leading indicators of facility investment

-40 -20 0 20 40 60

2 3 4 5 6 7 8 9 10

2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1 2015.Q1 2016.Q1 2017.Q1 2018.Q1 (trillion won)

machinery imports (right)

machinery orders (left)

sources: statistics korea (machinery orders), korea international Trade Association (machinery imports) (y-o-y, %)

The facility investment index in November fell 5.1 percent month-on-month as both machinery investment and transportation equipment investment decreased. The index fell 10.0 percent year-on-year.

Facility investment pressure increased, but other leading indicators, such as domestic machinery orders received, capacity utilization rates and machinery imports, fell.

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

80 (Jul 2018) → 73 (Aug) → 77 (Sep) → 78 (Oct) → 72 (Nov) → 71 (Dec) → 71 (Jan 2019)

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2016 2017 2018 Annual Annual¹ Q1¹ Q2¹ Q3¹ Q4¹ Q1¹ Q2¹ Q3¹ Construction investment² 10.3 7.6 4.2 0.9 1.1 -2.3 1.8 -2.1 -6.7

(y-o-y) - - 11.3 8.5 8.0 3.8 1.8 -1.5 -8.9

- Building construction 16.2 12.1 4.5 2.4 1.9 -1.6 0.7 -1.1 -6.7 - Civil engineering works -1.8 -3.5 3.5 -3.0 -1.2 -4.2 5.3 -4.7 -6.6 1. Preliminary 2. national accounts source: Bank of korea

Construction investment

-15 -10 -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 (%)

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 (y-o-y, %)

Building construction residential buildings

Civil engineering works

Construction investment (preliminary GDP) in the third quarter of 2018 fell 6.7 percent quarter-on-quarter and 8.9 percent year-on-year.

4. Construction investment

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2016 2017 2018

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 oct¹ nov¹ Construction orders

received (current value) 8.1 -3.1 1.2 17.9 -10.2 -15.0 3.6 -15.7 -5.7 15.4 -3.3

(q-o-q, m-o-m) - - -5.4 8.5 -10.6 -1.1 8.0 -11.1 6.7 -24.8 15.3

- Building construction 14.4 -6.5 -7.7 8.4 -8.3 -15.5 -0.5 -14.7 -23.6 17.4 -2.4 - Civil engineering works -10.5 9.7 29.7 63.3 -17.3 -13.0 13.0 -19.1 67.0 7.3 -6.4 Building permits² -5.7 -4.0 -5.0 -7.8 -0.3 -2.4 3.7 -7.2 -10.2 -11.1 -5.3 1. Preliminary 2. Floor area sources: statistics korea, ministry of Land, infrastructure and Transport

2016 2017 2018

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 oct¹ nov¹ Construction completed (constant) 15.4 10.1 4.3 -0.2 -0.3 -0.1 2.5 -4.9 -4.4 -1.8 -0.9

(y-o-y) - - 17.7 13.6 12.7 -0.5 1.5 -3.4 -9.8 -3.1 -10.6

- Building construction 25.7 18.2 5.8 2.2 1.8 -0.9 0.8 -2.3 -5.1 -0.4 -2.8 - Civil engineering works -2.6 -8.4 0.6 -6.5 -6.2 2.3 7.4 -12.3 -2.3 -6.1 5.3 1. Preliminary source: statistics korea

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 (y-o-y, %)

Construction orders

Building permit area

sources: statistics korea (construction orders), ministry of Land, infrastructure and Transport (building permit area)

Construction completed (constant) in November decreased 0.9 percent month-on-month as building construction declined. The index decreased 10.6 percent year-on-year.

Leading indicators show mixed signals: Apartment presales increased, but construction orders received and building permits declined.

Apartment presales (thousands, monthly average of the quarter, Real Estate 114)

19 (Q1 2017) → 27 (Q2) → 30 (Q3) → 34 (Q4) → 17 (Q1 2018) → 37 (Q2) → 22 (Q3) → 24 (Q4)

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(us $ billion)

2016 2017 2018

Annual Annual Q3 Q4 dec Annual Q1 Q2 Q3 Q4 nov dec¹

Exports 495.43 573.69 151.05 143.54 49.04 605.47 145.10 151.60 153.60 155.10 51.77 48.46

(y-o-y, %) -5.9 15.8 24.0 8.4 8.8 5.5 9.8 3.1 1.7 8.1 4.1 -1.2

Average daily

exports 1.81 2.13 2.13 2.23 2.18 2.24 2.17 2.30 2.28 2.23 2.16 2.15 1. Preliminary source: korea Customs service

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 (y-o-y, %)

export growth rate Automobiles

semiconductors steel

sources: korea Customs service, ministry of Trade, industry and energy (export and import trends)

Exports (preliminary) decreased 1.2 percent year-on-year to US $48.46 billion in December.

By item, automobiles, vessels, petroleum products rose, while home appliances, computers and wireless communications devices dropped. By region, shipments to the EU, the US, India and Vietnam increased, while exports to Latin America, China and the Middle East declined.

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

27.2 (automobiles), 26.4 (vessels), 8.4 (petroleum products), -11.7 (home appliances), -16.9 (computers), -33.7 (wireless communications devices)

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

22.6 (EU), 22.0 (US), 9.9 (India), 1.1 (Vietnam), -9.3 (Latin America), -13.9 (China), -27.0 (Middle East)

Average daily exports, an indicator calculated according to days worked, fell 1.2 percent year-on-year to US $2.15 billion.

Average daily export growth (y-o-y, %)

10.7 (Q1 2018) → 3.9 (Q2) → 7.0 (Q3) → -4.1 (Oct) → 4.1 (Nov) → -1.2 (Dec)

5. Exports and Imports

(19)

(us $ billion)

2016 2017 2018

Annual Annual Q3 Q4 dec Annual Q1 Q2 Q3 Q4 nov dec¹

Imports 406.19 478.48 120.85 123.40 43.53 534.99 132.37 133.08 130.31 139.23 46.84 43.91 (y-o-y, %) -6.9 17.8 17.9 11.6 13.6 11.8 13.7 13.0 7.8 12.8 11.5 0.9 Average daily

imports 1.49 1.78 1.70 1.91 1.93 1.98 1.98 2.02 1.93 2.00 1.95 1.95 1. Preliminary

source: korea Customs service

(us $ billion)

2016 2017 2018

Annual Annual Q3 Q4 dec Annual Q1 Q2 Q3 Q4 nov dec¹ Trade balance 89.23 95.22 30.20 20.14 5.51 70.49 12.70 18.55 23.33 15.91 4.93 4.56 1. Preliminary source: korea Customs service

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 (y-o-y, %)

import growth rate Commodities Capital goods

sources: korea Customs service, ministry of Trade, industry and energy (export and import trends)

Imports (preliminary) in December rose 0.9 percent year-on-year to US $43.91 billion.

Imports of commodities and consumer goods continued to grow, and capital goods imports fell at a faster rate.

Import growth by category (y-o-y, Nov

→ Dec)

25.2 → 5.7 (commodities), -3.8 → -8.7 (capital goods), 3.7 → 7.6 (consumer goods)

The trade balance (preliminary) posted a surplus of US $4.56 billion in

December, staying in the black for the 83

^rd

consecutive month. Surpluses

decreased month-on-month.

(20)

Mining and manufacturing production fell 1.7 percent month-on-month in November as manufacturing, as well as gas & electricity, weakened. The index rose 0.1 percent year-on-year.

Compared to the previous month, production of mechanical equipment (up 1.0%), processed metals (up 0.8%) and electrical equipment (up 0.4%) rose, while electronic components (down 0.7%), other transportation equipment (down 1.0%) and nonmetallic minerals (down 0.5%) fell.

Compared to a year ago, production of mechanical equipment (up 2.1%), food (up 2.7%) and beverages (up 6.0%) rose, while other transportation equipment (down 15.8%), broadcasting & communications equipment (down 11.1%) and automobiles (down 3.7%) declined.

The manufacturing inventory-shipment ratio rose 4.6 percentage points month-on-month to 112.3 percent as inventories rose 1.7 percent and shipments fell 2.5 percent.

Inventories of refined petroleum (up 9.5%), semiconductors (up 4.4%) and electronic components (up 6.3%) rose, while chemical products (down 1.5%), rubber & plastics (down 1.0%) and automobiles (down 0.3%) declined.

Shipments of other transportation equipment (up 3.3%), clothing & fur (up 11.0%) and food (up 1.7%) rose, while semiconductors (down 16.3%), broadcasting & communications equipment (down 16.4%) and automobiles (down 2.9%) fell.

The capacity utilization rate of the manufacturing sector fell 1.1 percentage points month-on-month to 72.7 percent.

6. Mining and manufacturing production

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

(%)

industrial production (y-o-y)

industrial production (m-o-m)

(21)

Expansionary fiscal policies and strong consumption are expected to support mining and manufacturing, but there are concerns with regard to trade conflicts between the US and China, Fed’s rate hikes and global financial market volatility.

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

(%)

2017 2018

Annual Q3 nov Q2 Q3 sep oct¹ nov¹ Mining and manufacturing² (q-o-q, m-o-m) - 0.8 -1.2 2.7 0.6 -2.9 1.3 -1.7 (y-o-y) 1.9 4.6 -1.1 0.7 -1.8 -8.6 10.9 0.1

Manufacturing

Production (q-o-q, m-o-m) - 0.6 -1.5 3.0 0.3 -2.3 1.1 -1.9 (y-o-y) 1.6 4.6 -1.9 0.5 -2.3 -9.1 11.2 0.1

Shipment 0.7 4.3 -0.4 -0.8 -3.1 -9.0 11.2 -2.3

-Domestic consumption 1.4 6.1 -0.6 -1.3 -5.1 -12.6 12.9 -1.3

-Exports -0.3 1.8 -0.1 -0.1 -0.3 -3.9 8.9 -3.8

Inventory³ 8.8 2.5 4.9 8.2 5.3 5.3 2.8 5.9

Capacity utilization rate 72.6 73.0 71.7 73.2 74,2 73.7 73.8 72.7 Production capacity (y-o-y) 1.1 0.7 0.0 -1.0 -1.5 -2.1 -1.9 -1.8 1. Preliminary 2. including mining, manufacturing, electricity and gas industry 3. end-period

(22)

Service sector activity

-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 (%)

service sector activity (y-o-y)

service sector activity (m-o-m)

source: statistics korea (industrial activity trends

Service output decreased 0.2 percent month-on-month in November.

Wholesale & retail, transportation & storage services and hotels & restaurants rose, while information & communications services, financial & insurance services and real estate & renting declined. Compared to a year ago, service output rose 1.0 percent.

7. Service sector activity

Weight 2016 2017 2018

Annual Annual Q1 Q2 Q3¹ oct¹ nov¹

Service activity index 100.0 2.6 1.9 1.0 0.2 0.1 0.6 -0.2

- Wholesale & retail 21.1 2.6 0.7 1.0 -0.6 0.0 0.6 1.7

- Transportation & storage services 9.0 2.2 1.6 -0.6 3.7 -1.1 -0.6 1.3

- Hotels & restaurants 6.2 2.3 -1.9 -2.0 1.6 0.3 -1.9 1.5

- Information & communications services 8.0 2.5 1.5 1.5 -2.0 1.2 -1.0 -1.4 - Financial & insurance services 14.1 4.1 5.1 1.4 1.0 -1.5 2.4 -3.5

- Real estate & renting 3.2 0.6 1.2 5.1 -0.6 0.2 -2.2 -3.5

- Professional, scientific & technical services 7.1 -0.8 -1.6 3.2 0.0 -1.5 2.9 0.8

- Business services 4.8 1.5 4.3 0.2 -1.9 -1.2 2.4 -0.2

- Education services 10.6 0.7 0.0 0.1 0.4 -0.7 1.8 0.1

- Healthcare & welfare services 9.4 8.1 7.0 1.5 -0.2 6.4 -2.5 0.6 - Entertainment & leisure 2.2 2.3 0.2 2.0 -1.7 -0.6 -4.8 1.9 - Membership organizations & personal services 3.2 0.3 0.0 1.4 0.1 -2.0 5.1 -2.2 - Sewerage & waste management 1.1 3.1 -2.3 2.3 1.0 -0.8 11.5 -5.1 1. Preliminary

(23)

November 2018 service output by business

-4 -2 0 2 4 6 8 10

Wholesale

& retail Transportation &

storage services

Financial &

insurance services

Business services

Healthcare & social welfare services

Membership organizations

& personal services Total

index Hotels &

restaurants

Information &

communications services

Real estate

& renting

Education services

Entertainment

& leisure Professional,

scientific &

technical services

Sewerage &

waste management (y-o-y, %))

2018

may Jun Jul Aug sep oct nov¹ dec¹

Domestic sales of cars (y-o-y, %) -0.3 -5.9 3.3 6.8 -18.7 23.1 -0.4 3.3 Department store sales (y-o-y, %) 2.0 5.0 3.2 2.9 4.3 3.9 -3.4 0.5 Large discount store sales (y-o-y, %) -3.0 0.9 -2.5 2.0 7.5 -12.2 -1.7 -3.6 Average daily stock transactions (trillion won) 15.0 12.5 9.0 8.8 10.8 9.6 8.4 8.7 Number of Chinese tourists (y-o-y, %) 46.1 49.0 45.9 41.0 36.4 37.7 41.1 37.9² 1. Preliminary

2. Advanced estimates 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 Automobile manufacturers Association, korea exchange, data provided by retail industries

Wholesale & retail

-6 -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 (%)

Wholesale & retail (y-o-y)

Wholesale & retail (m-o-m)

source: statistics korea (industrial activity trends

In December department store sales and auto sales increased, as well as stock

transactions, but large discount store sales declined.

(24)

Employment by industry

3.4 3.7 4.4 5.0 5.3 5.4 5.2 5.3 5.3 5.3 5.0 4.0 3.8 3.8 4.5 5.2 5.5 5.5 5.4 5.5 5.5 5.5 5.3 17.4 17.5 17.2 17.0 17.0 17.1 17.0 16.9 16.9 16.9 17.0 17.4 17.6 17.5 17.1 16.6 16.7 16.5 16.6 16.5 16.7 16.7 16.5 7.3 7.3 7.3 7.4 7.5 7.5 7.4 7.3 7.5 7.5 7.6 7.7 7.6 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.6 7.7 7.8 71.9 71.5 71.1 70.6 70.2 70.1 70.4 70.6 70.4 70.3 70.5 70.9 71.1 71.2 70.9 70.3 70.0 70.1 70.1 70.2 69.9 69.8 70.1

2017.1 2 3 4 5 6 7 8 9 10 11 12 2018.1 2 3 4 5 6 7 8 9 10 11

100

80

60

40

20

0 (%)

manufacturing Construction services

Agriculture, forestry &

fisheries

source: statistics korea (employment trends)

The number of workers on payroll in December increased by 34,000 from a year earlier to 26,638,000, and the employment rate (aged 15-64) fell 0.1 percentage points to 66.5 percent.

By industry, jobs in services and construction grew at a slower rate, while manufacturing jobs declined at a faster rate.

By employment status, permanent workers led job growth, while temporary and self-employed workers continued to decrease.

Number of persons employed and employment growth

21 22 23 24 25 26 27 28

-400 -200 0 200 400 600 800 1,000

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (thousands)

number of employed (seasonally adjusted, right)

employment growth (y-o-y, left)

(millions)

8. Employment

(25)

2017 2018

Annual Q3 Q4 dec Annual Q1 Q2 Q3 Q4 dec

Number of employed (millions) 26.73 27.00 26.88 26.60 26.82 26.28 27.02 27.02 26.97 26.64 Employment rate (%) 60.8 61.4 61.0 60.4 60.7 59.6 61.2 61.1 60.9 60.1 (Seasonally adjusted) 60.8 60.8 60.9 61.0 60.7 60.9 60.7 60.5 60.7 60.7

- 15 to 64 66.6 67.0 66.9 66.6 66.6 66.0 66.9 66.7 66.8 66.5

Employment growth

(y-o-y, thousands) 316 279 265 257 97 183 101 17 88 34

- Manufacturing -18 30 41 77 -56 45 -91 -91 -88 -127

- Construction 119 84 92 83 47 69 16 45 56 35

- Services 209 144 103 37 51 18 125 6 55 47

· Wholesale & retail 41 20 28 -7 -72 -74 -50 -87 -77 -63

· Hotels & restaurants -3 -31 -40 -58 -45 -24 -24 -69 -65 -39 · Healthcare

& social welfare services 61 53 54 22 125 51 148 142 159 154

- Wage workers 265 291 265 255 150 228 113 65 192 128

· Permanent workers 366 417 382 406 345 409 335 293 342 333

· Temporary workers -132 -145 -104 -102 -141 -124 -109 -162 -170 -256

· Daily workers 31 19 -13 -50 -54 -57 -113 -67 19 51

- Nonwage workers 51 -12 0 2 -52 -45 -13 -48 -104 -94

· Self-employed workers 68 23 20 18 -44 -24 -3 -55 -93 -94

- Male 127 92 72 85 4 75 -14 -48 1 -14

- Female 189 187 193 172 94 109 115 65 87 48

- 15 to 29 -1 -7 -42 -52 -3 26 -69 -27 58 38

- 30 to 39 -29 -18 -17 -26 -61 -29 -33 -91 -92 -103

- 40 to 49 -50 -55 -54 -60 -117 -85 -101 -143 -139 -135

- 50 to 59 152 139 134 146 44 67 62 26 21 31

- 60 and above 242 221 243 250 234 203 241 252 239 203

Employment by status of workers

50.8 51.0 50.6 49.9 49.7 49.6 49.8 50.2 50.0 50.0 50.2 51.1 52.0 52.4 51.5 50.9 50.8 50.8 50.7 51.3 51.2 51.2 51.1 18.4 18.3 18.6 18.7 18.9 19.0 18.9 18.8 18.7 18.7 18.8 18.5 17.8 17.5 18.1 18.3 18.4 18.4 18.5 18.1 18.0 18.1 18.2 5.7 5.5 5.4 5.8 5.9 5.9 5.9 5.4 5.6 5.6 5.7 5.6 5.4 5.2 5.3 5.4 5.4 5.4 5.4 5.2 5.5 5.6 5.8 21.3 21.4 21.4 21.3 21.2 21.2 21.2 21.3 21.3 21.4 21.1 21.0 21.1 21.2 21.2 21.2 21.1 21.0 21.1 21.1 21.0 20.9 20.7 3.7 3.8 4.0 4.3 4.3 4.4 4.3 4.3 4.3 4.4 4.2 3.7 3.7 3.7 3.9 4.2 4.3 4.4 4.3 4.4 4.3 4.2 4.2

0 20 40 60 80 100

2017.1 2 3 4 5 6 7 8 9 10 11 12 2018.1 2 3 4 5 6 7 8 9 10 11

(%)

Temporary workers daily workers self-employed workers unpaid family workers

regular workers

(26)

2017 2018

Number of unemployed

(thousands) 1,023 963 892 913 1073 1,181 1,105 1,065 942 944

Unemployment growth

(y-o-y, thousands) 14 -20 14 49 50 19 31 102 50 31

- Male 12 -8 42 74 23 13 15 42 24 26

- Female 1 -12 -28 -25 27 6 17 60 25 5

Unemployment rate (%) 3.7 3.4 3.2 3.3 3.8 4.3 3.9 3.8 3.4 3.4

(Seasonally adjusted) 3.7 3.7 3.7 3.7 3.8 3.7 3.8 4.0 3.8 3.8

- 15 to 29 9.8 9.3 9.0 9.2 9.5 10.0 10.1 9.4 8.3 8.6

- 30 to 39 3.3 3.0 3.0 3.0 3.4 3.3 3.6 3.6 3.0 2.8

- 40 to 49 2.1 2.0 1.8 1.8 2.5 2.5 2.5 2.6 2.3 2.3

- 50 to 59 2.2 2.3 1.8 1.9 2.5 2.5 2.6 2.6 2.3 2.4

- 60 and above 2.9 2.2 2.2 2.6 3.1 5.4 2.5 2.3 2.4 2.5

a year earlier to 944,000, and the unemployment rate rose 0.1 percentage points to 3.4 percent.

The unemployment rate fell year-on-year among young adults and those in their 30s but rose among those aged 40 and older.

Unemployment rate

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 6

5

4

3

2 (%)

seasonally adjusted rate original data

(27)

2017 2018

Economically inactive

population (millions) 16.18 16.01 16.26 16.54 16.29 16.62 16.02 16.13 16.38 16.73 Labor force

participation rate (%) 63.2 63.6 63.1 62.5 63.1 62.3 63.7 63.5 63.0 62.2 (Seasonally adjusted) 63.2 63.1 63.2 63.3 63.1 63.3 63.1 63.1 63.2 63.1 Growth in economically

inactive population

(y-o-y, thousands) -5 56 30 -1 104 68 110 126 112 190

- Childcare -96 -105 -107 -97 -76 -80 -87 -86 -50 -38

- Housework 8 8 -33 -30 76 52 85 94 75 55

- Education -91 -88 -81 -86 -106 -58 -62 -128 -176 -136

- Old age 81 98 69 51 15 35 6 16 4 33

- Rest 108 166 220 207 118 107 127 137 103 127

- Job seeking 45 79 -10 -27 24 15 17 2 64 75

Labor force participation rate

59 60 61 62 63 64 65

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (%)

seasonally adjusted rate original data

The economically inactive population in December increased 190,000 from a year earlier to 16,733,000, and the labor force participation rate fell 0.3 percentage points to 62.2 percent.

The number of persons economically inactive due to rest (up 127,000) and

housework (up 55,000) increased, and those due to education (down 136,000)

and childcare (down 38,000) decreased. Job seekers were up by 75,000.

(28)

KOSPI KOSDAQ nov 2018 dec 2018 Change¹ nov 2018 dec 2018 Change¹ Stock price index (points) 2,096.9 2,041.0 -55.9 (-2.7%) 695.8 675.7 -20.1 (-4.8%) Market capitalization

(trillion won) 1,403.5 1,344.0 -59.5 (-4.2%) 233.0 228.2 -4.8 (-2.1%) Daily trade (trillion won) 5.3 5.2 -0.1 (-1.9%) 3.1 3.2 0.1 (2.2%) Foreign stock ownership

(%, %p) 36.0 35.8 -0.2 (-0.6%) 11.0 11.1 0.1 (0.5%)

1. Change from the end of the previous month as of end-december 2018 source: korea exchange

(Closing rate)

Stock prices

300 600 900 1,200 1,500 1,800 2,100 2,400 2,700

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.

(monthly average, points)

kosPi kosdAQ

source: korea exchange

9.1 Stock market

KOSPI fell 2.7 percent in December from 2,096.9 points to 2,041.0 points amid continuing trade conflicts between the US and China, rising uncertainties over the Chinese economy and growing concerns about a slowdown of the local economy. KOSDAQ dropped 4.8 percent from 695.8 points to 675.7 points.

9. Financial markets

9.2 Exchange rate

The dollar-won exchange rate declined 0.5 percent in December from 1,121.2 won to 1,115.7 won on expectations that Fed might slow down its rate hikes, and also due to concerns about a prolonged US government shutdown.

The 100 yen-won exchange rate rose 2.0 percent from 988.8 won to 1,008.9 won.

(29)

2012 2013 2014 2015 2016 2017 2018

dec dec dec dec dec dec nov dec Change²

Dollar-Won 1,070.6 1,055.4 1,099.3 1,172.5 1,207.7 1,070.5 1,121.2 1,115.7 0.5 100 Yen-Won 1,238.3 1,002.3 913.0 974.1 1,035.4 949.3 988.8 1,008.9 -2.0 1. The exchange rate is based on the closing price at 3:30 p.m., local time.

2. Appreciation from the end of the previous month as of end-december 2018 (%) source: Bank of korea

(Closing rate¹)

Foreign exchange rates

800 1,000 1,200 1,400 1,600

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (month-end, ₩)

dollar-Won 100 Yen-Won

source: Bank of korea

9.3 Bond market

Korea treasury yields declined in December on expectations that Fed may slow down its rate hikes. Growing uncertainties with regard to Brexit and US-China trade negotiations, as well as global slowdown concerns, also brought about falling yields.

Yield to maturity (m-o-m, basis points)

-8.0 (3 yrs), -8.8 (5 yrs), -15.8 (10 yrs), -9.3 (20 yrs), -4.7 (30 yrs)

2012 2013 2014 2015 2016 2017 2018

dec dec dec dec dec dec oct nov dec Change¹

Call rate (1 day) 2.77 2.52 2.03 1.52 1.27 1.58 1.57 1.76 1.89 13.0

CD (91 days) 2.89 2.66 2.13 1.67 1.52 1.66 1.70 1.90 1.93 3.0

Treasury bonds (3 yrs) 2.82 2.86 2.10 1.66 1.64 2.14 1.94 1.90 1.82 -8.0 Corporate bonds (3 yrs) 3.29 3.29 2.43 2.11 2.13 2.68 2.39 2.37 2.29 -8.0 Treasury bonds (5 yrs) 2.97 3.23 2.28 1.81 1.80 2.34 2.07 1.97 1.88 -8.8 1. Basis points, change from previous month as of end-december 2018 source: Bank of korea

(Closing rate, %)

(30)

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

2011 2012 2013 2014 2015 2016 2017 2018

Annual Annual Annual Annual Annual Annual Annual sep oct oct¹

M1² 6.6 3.8 9.5 10.9 18.6 15.4 9.2 4.3 1.7 840.7

M2 4.2 5.2 4.8 6.6 8.6 7.3 5.5 6.4 6.8 2,674.5

Lf³ 5.3 7.8 6.9 7.0 9.7 8.1 6.7 7.2 7.4 3,759.6

1. Balance at end-october 2018, trillion won

2. m1 excludes corporate mmFs and individual mmFs, and includes CmAs 3. Liquidity aggregates of financial institutions (mostly identical with m3) source: Bank of korea

Interest rates

0 1 2 3 4 5 6 7 8

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (monthly average, yearly, %)

overnight call rate (daily) 3-yr Treasury bond yield 3-yr corporate bond yield

9.4 Money supply and money market

M2 (monthly average) in October rose 6.8 percent from a year ago as private sector credit continued to increase, led by businesses.

Bank deposits grew only 0.2 trillion won in November, a huge drop from 11.5 trillion won in the previous month. Money flowed out from instant access deposits (down 3.8 trillion won) and time deposits (down 0.8 trillion won). Local governments withdrew funds from time deposits for their year-end spending.

Asset management company (AMC) deposits decreased 1.2 trillion won as

money flowed out from money market funds (MMFs) (down 6.3 trillion

won). The government withdrew its surplus funds from MMFs, and banks

also withdrew their funds in MMFs.

(31)

(Change from the end of previous period, trillion won) 2011 2012 2013 2014 2015 2016 2017 2018

Annual Annual Annual Annual Annual Annual Annual sep oct nov nov¹ Bank deposits 58.9 37.0 41.0 115.4 100.3 80.8 79.5 15.4 11.5 0.2 1,628.3 AMC deposits -16.6 18.8 17.7 42.4 44.4 47.6 27.9 -13.4 20.6 -1.2 561.0 1. Balance at end-november 2018

Total money supply

0 5 10 15 20 25 30 35

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (y-o-y, monthly average balance, %)

reserve money m1 Lf

Deposits in financial institutions

-20 -10 0 10 20 30 40 50 60

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1

(m-o-m, end of month balance, trillion won)

(32)

Korea’s current account (preliminary) in November posted a surplus of US $5.06 billion, staying in the black for 81 consecutive months.

Goods account surpluses grew at a slower pace month-on-month from US $11.00 billion to US $7.97 billion.

Growth in goods exports (y-o-y, %)

22.6 (Oct 2018) → 4.1 (Nov)

Growth in goods imports (y-o-y, %)

28.1 (Oct 2018) → 11.5 (Nov)

Export growth by item in November (y-o-y, %, customs clearance basis)

158.4 (vessels), 20.8 (petroleum products), -10.8 (computers), 11.6 (semiconductors), -16.8 (home appliances)

Import growth by category in November (y-o-y, %, customs clearance basis)

25.2 (commodities), -3.8 (capital goods), 3.7 (consumer goods)

Services account deficits increased month-on-month from US $2.22 billion to US $2.29 billion.

Services balance (US $ billion, Oct → Nov)

-0.39 → -0.14 (transportation), 0.73 → 0.66 (construction), -0.27 → 0.08 (intellectual property rights), -0.67 → -0.67 (manufacturing), -0.95 → -1.27 (travel), -0.95 → -1.19 (others)

Surpluses in the primary income account decreased from US $0.96 billion to US $0.03 billion, and deficits in the secondary income account increased from US $0.54 billion to US $0.65 billion.

Current account balance

-6 -3 0 3 6 9 12 15 18

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (us $ billion)

services account Goods account Current account

source: Bank of korea (balance of payments trends)

10. Balance of payments

(33)

(us $ billion)

2016 2017 2018

Annual Annual¹ Q1¹ Q2¹ Q3¹ Q4¹ nov¹ Q1¹ Q2¹ Q3¹ nov¹ Current account 99.24 78.46 19.20 16.45 25.57 17.24 7.43 11.83 17.83 28.03 5.06 - Goods balance 118.90 119.89 27.31 29.56 34.75 28.27 11.46 23.91 31.78 35.91 7.97 - Services balance -17.74 -34.47 -8.66 -6.75 -8.50 -10.56 -3.27 -9.41 -6.53 -7.75 -2.29 - Primary income balance 3.85 0.12 1.37 -4.88 1.95 1.68 -0.07 0.39 -5.17 1.94 0.03 - Secondary income balance -5.77 -7.08 -0.82 -1.48 -2.63 -2.15 -0.70 -3.06 -2.26 -2.07 -0.65 1. Preliminary

The capital and financial account (preliminary) in November posted an outflow of US $4.26 billion.

Capital & financial account balance

^* (US $ billion)

4.63 (Jun 2018) → 10.46 (Jul) → 7.28 (Aug) → 9.73 (Sep) → 10.59 (Oct) → 4.26 (Nov)

* Positive figures represent net outflows, and negative figures represent net inflows.

Net outflows decreased in foreign direct investment (FDI) (US $3.36 billion in October → US $0.22 billion in November) as Korean FDI (US $4.32 billion outflow → US $2.01 billion outflow) went down while inbound FDI went up (US $0.96 billion inflow → US $1.79 billion inflow).

Net outflows decreased in portfolio investment (US $6.75 billion in October

→ US $5.03 billion in November) as outflows decreased in foreign investment in Korean shares (US $4.08 billion outflow → US $0.19 billion outflow).

Korean investment in foreign shares continued to rise (US $2.67 billion outflow → US $4.84 billion outflow).

Net outflows decreased in financial derivatives investment (US $0.77 billion outflow → US $0.34 billion outflow) and net inflows declined in other investment (US $2.45 billion inflow → US $1.29 billion inflow).

Current account surpluses for December will remain stable given trade

surpluses (US $4.90 billion in November → US $4.60 billion in December)

have declined slightly.

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(Percentage change) 2018

mar Apr may Jun Jul Aug sep oct nov dec

Consumer price inflation (m-o-m) -0.1 0.2 0.0 -0.2 -0.2 0.9 0.8 -0.2 -0.7 -0.3

(y-o-y) 1.2 1.5 1.5 1.5 1.1 1.4 2.1 2.0 2.0 1.3

11.1 Consumer prices

Consumer prices in December fell 0.3 percent from the previous month and rose 1.3 percent from the same period of the previous year.

Consumer price inflation

-1 0 1 2 3 4 5 6

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (%)

Consumer price inflation (m-o-m) Consumer price inflation (y-o-y)

source: statistics korea (consumer price trends)

Fresh food prices went up at a slower pace (up 7.6% → 5.2%, y-o-y) as vegetable and meat prices declined month-on-month and fish prices stabilized.

Fresh food prices in December (m-o-m/y-o-y, %)

-5.6/5.5 (vegetables), -0.5/-2.4 (meat), 0.1/1.7 (fish)

Domestic oil prices declined (up 6.6% → down 2.8%, y-o-y) due to falling international oil prices and a strong won, as well as fuel tax cuts.

Personal service prices have been stable (up 2.8% → up 2.5%, y-o-y), the expanded coverage of national health insurance and national school lunch programs continuing to have an effect.

11. Prices

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Contribution to consumer price inflation

-1 1 3 5

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

(%p)

manufactured products housing rents Public services Personal services

Public utilities

Agricultural, livestock &

fishery products

source: statistics korea (consumer price trends)

(Percentage change from same period in previous year) 2018

may Jun Jul Aug sep oct nov dec Consumer prices excluding oil and agricultural products 1.3 1.2 0.8 0.9 1.3 1.2 1.4 1.3 Consumer prices excluding food and energy 1.4 1.3 1.0 1.0 1.1 1.0 1.2 1.1 source: statistics korea

Total Fresh foods Manufactured

products Public utilities Housing

rents Public

services Personal services productsoil

Nov (y-o-y, %) 2.0 7.6 1.4 6.6 1.5 0.3 0.2 2.8

Dec (y-o-y, %) 1.3 5.2 0.1 -2.8 1.4 0.3 0.1 2.5

- Contribution (%p) - 0.39 0.05 -0.13 0.05 0.03 0.01 0.8

Consumer price inflation in major sectors

Core inflation, which excludes oil and agricultural products, decelerated in December (up 1.4% → up 1.3%, y-o-y).

(Percentage change from same period in previous year) 2018

may Jun Jul Aug sep oct nov dec

Consumer prices for basic necessities 1.5 1.5 1.1 1.5 2.5 2.6 2.3 1.3

Fresh food prices 1.9 -0.2 -1.3 4.8 11.0 11.2 10.5 6.6

The fresh food price index rose at a slower rate (up 10.5% → up 6.6%, y-o-y) in December.

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Prices

9

6

3

0

-3

-6

2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1 (y-o-y , %)

Consumer price inflation Core inflation Producer price inflation

sources: statistics korea (consumer price trends), Bank of korea (producer prices)

International oil prices

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 (us $/B)

WTi dubai crude

source: korea national oil Corporation

11.2 International oil and commodity prices

International oil prices fell in December amid concerns about a supply glut and slowdown in global demand. Dubai crude prices posted US $49.5 per barrel on December 26, the lowest since August 31, 2017.

Dubai crude (US $/barrel)

60.16 (1^st week Dec 2018) → 59.26 (2^nd week) → 55.83 (3^rd week) → 51.82 (4^th week)