RELEASED ECONOMIC FIGURES TODAY:
Q2 ’12 GDP (qtr-to-qtr): 0.3%
Q2 ’12 GDP (year-on-year): 2.3%
ASIA-PACIFIC GLOBAL RESEARCH GROUP – ECONOMIC PROJECTIONS:
Q3 ’12 GDP (qtr-to-qtr): p.2-0.45% range
Q3 ’12 (year-on-year): 2.2-2.5% range
2013 (fiscal year): 2.5-2.7%
POTENTIAL RISKS (TO SOUTH KOREAN ECONOMY):
– EXTERNAL: U.S. (lower manufacturing levels), CHina (Higher inventory levels), and EU (ongoing fiscal crisis). These 3 regions represent South Korea’s top trading partners. Given that South Korea’s GDP is nearly 48% dependent on exports, any slump in one or more of these regions may have a negative impact on the local economy.In other words, less sales of Samsung smartphones and Hyundai cars abroad in the U.S., China, and/or EU, will translate into lower future GDP growth levels.
– INTERNAL: South Korea’s rising household debt (including mortgages, credit card debt, and non-bank loans). The economy also has one of the world’s lowest fertility rates and a rapidly aging/retiring labor force, which will also lead to less people able and willing to work, in addition to greater demand for retirement/pension benefits. Such factors will continue to put a heavy strain on the South Korean economy.
POTENTIAL BENEFITS (TO SOUTH KOREAN ECONOMY):
– FISCAL STIMULUS PLAN: possible US$7.5 bln equivalent (without a supplementary budget appropriation) may be announced soon, but it is unclear what positive economic effects such stimulus plan will ultimately have.
– Possible economic rebound in one or more of the following regions: US, China, EU
OTHER RELATED CONSIDERATIONS: The overall macroeconomic trend is downward economic forecasts for South Korea. In 2011, South Korea grew at 3.6%. Government estimates for 2012 range from 3.0-3.3% (revised from previous higher forecasts), while private sector economic forecasts have been more bearish, from 2.5-3.0% growth for 2012 overall. Other negative drags on the economy include a year-on-year drop in Exports (-6.2%) and Imports (-9.8%). Thus it is likely that 2013 economic forecasts may similarly also be revised downward to the 3.2-3.5% range, subject to various endogenous and exogenous variables and geopolitical events.
WHAT SOUTH KOREA NEEDS:We believe that South Korea can utilize funding vis-a-vis investment to convert South Korea from a “Copycat Confucian” to a “Creative Confucian” capitalist system. This will involve “rejiggering” the nation’s basic economic components to (1) a more Socratic-based education/teaching system; (2) a more robust and dynamic venture capital (VC) infrastructure; and (3) a pivot towards a more risk-taking mind-set by the general population.
Jasper Kim, founder of the Asia-Pacific Global Research Group, discussed these issues with BBC TV’s Asia Business Report today, which can be seen below: