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South Korea: Country Economic Forecast: 06 Feb 2012

Oxford Economics
February 6, 2012
11 Pages - SKU: OFE6799185

Abstract Table of Contents Search inside this report Related Reports

Countries covered: South Korea

Although the news on two of Korea's key trading partners, China and the US, has been reasonable over the last month, the unexpected weakness in consumer spending in 2011Q4 suggests a degree of fragility in the domestic economy that means the risks are still skewed to the downside. Consumer spending fell 0.4% on the quarter in Q4, the first drop since 2009Q1, despite a still fairly healthy labour market. And while we assume that this was a one-off decline, consumption is now expected to grow only 2.1% in 2012 compared to 2.8% last month. Meanwhile, though the external picture is not as bad as the January drop in exports (distorted by base effects) would suggest, it is not good enough to prevent firms having to cut back on the inventories built up in Q4. As a result, industrial output is likely to shrink further in Q1 and quarterly GDP growth will be marginal at best in this period. But looking forward, growth should accelerate as the headwinds ease, with GDP now forecast to expand 2.8% in 2012 as a whole compared with the 3% expected last month. The economy should receive a lift from higher infrastructure spending this year and, given its budget surplus last year, the government could boost the economy further if necessary (by cutting taxes for example). Given that inflation is still above target, a greater fiscal stimulus would seem more appropriate than cutting interest rates, but the possibility of the latter has increased with the domestic weakness evident in Q4.

South Korea:
The following represents a general Table of Contents outline for the Country Economic Forecast. The actual report may cover any or all of the topics listed below.
1. Highlights and Key Issues - four/five paragraphs of analysis covering the main economic and political issues contained in the subsequent Economic Overview
2. Forecast Table showing % changes for the country - with 2 years of historical data and 4 years of forecast data for the following:: Domestic demand; Private consumption; Fixed investment; Stockbuilding (% of GDP); Government consumption; Exports of goods and services; Imports of goods and services; Consumer prices; Current account balance (US$ and % of GDP); Government budget (% of GDP); Short-term interest rates (%); Long-term interest rates (%); Exchange rate (vs. US dollar); Exchange rate (vs. euro)
3. Economic Overview - two pages of events-driven analysis highlighting the most recent economic activity and, where relevant, political developments of the country, detailing significant changes to Oxford Economics' forecasts
4. Charts and Tables - covering a full range of economic developments relevant to the time period covered. These could include such topics as:: Contributions to GDP growth; Monthly industrial output; Unemployment rate; Retail sales; Prices and earnings; Consumption and investment; Government balance and debt; GDP and industrial production; Monetary base and bond yields
5. Background Information on the country: One or two pages of text covering the main historical political and economic factors that determine the country's current position
6. Key Facts on the country: Map of the country; Key political facts; Long-term economic and social development; Structure of GDP by output; Long-term sovereign credit ratings and outlook; Corruption perceptions index- latest year; Structural economic indicators; Destination of goods' exports -prior years; Composition of goods & services exports - latest year

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South Korea: Country Economic Forecast: 06 Feb 2012

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