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  • South Korea’s Q2 GDP figures release – analysis (breaking news)

    September 6th, 2012  by  Asia-Pacific Global Research Group - Jasper Kim

    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%
     
    SOCIO-ECONOMIC ANALYSIS:
     
    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:

     

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