South Korea Freight Transport Report Q1 2016
BMI View: We expect to see moderate growth across the different freight modes in Korea in 2016.
Road freight will post the strongest growth across the freight modes, growing by 4.6%, as the uptick in consumer spending will benefit this mode the most.
Rail freight growth will increase to 3% in 2016 as the good performance of the domestic construction sector in light of the Winter Olympics in 2018 will drive demand for iron and steel.
Air freight will see its growth rate decline to 2% as import demand from China for Korea's consumer electronics will be weak.
Over the medium term, we expect the Korean freight sector to benefit from the recently ratified FTA with Vietnam.
Over the short-term we hold a bearish view with regards to the Korean economy as the moderate recovery in the domestic economy will be insufficient to offset the stronger than expected slowdown in the external sector.
As a result, we have downgraded our real GDP forecast for 2016 to 2.8% from 3.0% previously.
Good growth in the construction sector will provide some support to economic growth in 2016, however, domestic consumption is expected to remain muted, largely predicated on South Korea's persistently high household debt load (approximately 90% of GDP).Weak demand for consumer articles will particularly hit air freight.
We expect to see relatively weak trade dynamics in 2016 as the ongoing slowdown in the Chinese economy as well as the strength of the Korean wong relative to the Japanese yen will continue to weigh on Korean exports.
Further, the high household indebtedness will partly mitigate the positive impact of the strong domestic currency on import demand.
Over the medium term, we expect trade flows to pick up slightly as Korea will benefit from the recently ratified FTA with Vietnam.
Further, recent signals of détente between the regional powers, China, Japan and South Korea as well as in the bilateral relationship between the two Koreas are good news for Korea's trade dynamics and, if resulting in the ratification of further FTA's, will stimulate freight over the long-term.
Learn how to effectively navigate the market research process to help guide your organization on the journey to success.Download eBook