This report focuses on the impact of the US government’s decision to reduce its quantitative easing program on Korea’s domestic economy and the current status of industrial and employment structures of different regions and cities.
    As the Federal Reserve Board (FRB) revealed its intention to reduce quantitative easing, the instability of the international financial market soared. The increase in volatility of key price variables in the international financial market drove up the possibility of a slowed recovery of the global economy. As financial markets of developing countries often show greater fluctuations, it is estimated that developing economies will be faced with a relatively harder blow. Expanded volatility of the domestic financial market is projected to dampen consumer sentiment and investor sentiment in the short run and lead to a weakened recovery in domestic demand. Also, as the percentage of developing countries among Korea’s export destinations is substantially high (73.1% as of May 2013), the worsening economic conditions in developing countries are expected to weaken the recovery trend of Korea’s exports. Korea’s export growth during the first half was mainly driven by the increase in exports of IT products to Asian countries. Therefore, the feeble economic recovery of these countries is likely to lead to a slowdown in exports of IT products to developing countries. For this reason, Korea’s economic recovery during the second half is more likely to become sluggish than originally expected.
    Korea’s annual average GRDP growth rate from 2006 to 2011 stood at 4.1%. Chungnam (9%), Gyeonggi (6%), Chungbuk (4.4%), and Gyeongnam (4.3%) turned out to have surpassed this figure. Non-capital areas center on manufacturing and capital areas on knowledge services. It must be noted that the knowledge service industry is currently recording the considerably high growth rate of 4% on a national level.
    The annual average increase in the number of full-time workers from 2008 to 2010 reached 2.8%. The regions with notably high increase rates include Daejeon (3.8%), Gyeonggi (3.7%), and Chungnam (3.7%). Over the past six years (2006-2011), the number of the employed has remained on an increase, especially in capital areas, and the gap between capital areas and non-capital areas began to dwindle in 2012.
    These findings highlight the need for fiscal and financial policies designed to achieve the balanced development of various regions, each of which demonstrates different growth rates for different industries and employment conditions. Also, as job creation by the knowledge service industry is being accelerated across the nation, it is necessary to more accurately analyze the driving forces behind such a trend and reinforce the pertinent policy capacities.

Won Dongah