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Korean Economy still 15th Largest
South Korea¡¯s economy remained as the world¡¯s 15th largest in 2009 for a second consecutive year, according to World Bank.
According to the international organization¡¯s World Development Indicators, Korea¡¯s nominal GDP fell to $832.5 billion last year from $929.1 billion in 2008, mainly due to the falling value of the Korean won against the U.S. dollar.
Korea¡¯s gross national income (GNI) per capita was $19,830 last year, which placed the country 54th in global rankings, down from 49th in 2008.
The government is predicting that the per capita figure may recover to $20,000 this year as a result of the current economic boom. Per capita income reached $22,000 in 2007.
Korea¡¯s rankings were affected last year by the global financial crisis, which resulted in a growth rate of only 0.2 percent in 2009, and a low inflation rate of 2.8 percent.
Analysts said Korea¡¯s rankings could improve this year since the economy is expected to grow close to 6 percent. The International Monetary Fund also raised Korea¡¯s growth rate to 5.75 percent from its previous estimate of 4.5 percent.
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First Haf Growth is Sizzling at 7.2%
The Korean economy is forecast to post 7.2 percent growth for the first half of this year. According to the Ministry of Strategy and Finance, the economy is projected to have grown 7.2 percent in the first half, which may prompt more calls for an interest rate hike and an exit from the government¡¯s economic stimulation measures.
The economy is expected to have expanded 6.3 percent on-year in the second quarter, after 8.1 percent on-year growth in the first quarter.
The domestic economic recovery was led by exports and domestic demand. Korea posted a record trade surplus of $7.5 billion in June, driven by strong exports, particularly in the shipbuilding, semiconductor and automotive sectors. Moreover, Korea¡¯s current account surplus in May hit a six-month high of $3.83 billion thanks to cutbacks in overseas spending by Koreans and a drop in dividend payments to foreign investors.
Meanwhile, employment in Korea has improved with the number of newly employed in May rising by 580,000 from a year earlier, the biggest increase in eight years.
As the economy recovers at a rapid pace, the Bank of Korea has to decide if it will raise interest rates. The central bank has kept the rate at a record low of 2 percent for 16 months as part of its strategy to get the economy over the global economic crisis. However, BOK Governor Kim Choong-soo hinted at a possible rate hike in the near future and vowed last month to focus more on ¡°price stability.¡±
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FDI Falls in First Half on Strong Won
Foreign direct investment in Korea fell by 6.7 percent in the first half of 2010 to $4.33 billion from $4.64 billion a year ago, the Ministry of Knowledge Economy said.
The ministry blamed the slight decrease on the stronger value of the Korean won, which makes investments more expensive, and the lingering effects of the global financial crisis.
The average value of the won was 1,154 against the U.S. dollar in the first half of this year against 1,351 won to the dollar in the first half of 2009.
However, FDI inflows on a quarter-on-quarter basis increased 81 percent in the second quarter to $2.8 billion from $1.54 billion in the first quarter, indicating economic conditions were rapidly improving.
So-called new growth industries, including biomedical, renewable energy, light-emitting diodes and software, received a bigger share of FDI this year, accounting for 31.3 percent of total FDI against 15.8 percent last year. Investment in manufacturing, including medicine and chemical engineering, rose 19.6 percent on-year to $1.99 billion, while investment in the service sector, including retail, fell 23 percent to $2.27 billion.
Foreign direct investments from emerging economies, including China and the Middle East, surged 80.5 percent on-year to $1.9 billion, investments from advanced economies, including the U.S., Japan and Europe, fell 32.5 percent to $2.4 billion.
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