This report explores the latest economic developments and provides an economic outlook. During Q4 of 2012, the slowdown of Korea’s domestic business showed some signs of easing. As in Q3, GDP during Q4 grew by 1.5% compared to the previous year and thus displayed some improvements compared to the previous quarter (Q3: 0.1% -> Q4: 0.4%). Major economic indicators, such as industrial production, retail sales, and exports (on a custom clearance basis), also showed upward movement as Q4 set in.
    Korea’s domestic business appears to have hit bottom during the second half of 2012 and is expected to steadily improve in the future. This projection is based on the fact that many leading indicators, both local and international, are showing signs of rebounding. With leading indicators of OECD and Statistics Korea and global business survey indexes drawing a rising curve, the international financial market remains stable. Reduced inventories (signifying an improvement in inventory cycle), improved terms of trade, rising exports of key export items, and spiraling prices of major IT products are also some of the factors that fuel the forecast for a gradual economic recovery. However, the recovery of Korea’s domestic economy is expected to remain considerably slow-paced throughout the first half of 2013. The reasons include the slowed business recovery of the US due to tax increases (totaling 200 billion USD) from partial agreements reached to avoid the so-called fiscal cliff; the financial aggravation and continued business slump plaguing Southern European countries; and exports rising less than forecasted due to a weaker Japanese yen. In addition, the stalled recovery of consumer spending due to aggravated employment conditions and household debt is also estimated to further keep the economy from regaining steam. 

Won Dongah