NABO Economic Trends & Issue (Issue No.1)

1. Domestic Economy Bottoming Out : Bottoming out from recession
- Upward momentum in domestic economy is forecasted to continue from the first quarter of 2009
. Cyclical component of Diffusion Index(DI) shows upward trajectory after bottoming out in Feb. 2009
. Upside surprise in Leading Indicator which forecasts the course of the economy in three or six months suggests rebounding economy is expected to continue since hitting bottom in Dec. 2008
. The export which drives the domestic economy seems to maintain the momentum of recovery because OECD leading indicator which correlated with export market shows upward climb.

2. Compared Economy Recovery with Rival Country : relatively rapid recovery
- The speed of recovery on Korea's export and industrial production is relatively faster than that of major rival countries.
. Firstly, Partial improvement on exporting environment of material industry(steel, petrochemical) by expanding Economic Stimulus Package from major industries, especially for East-Asian countries like China.
. Secondly, Improvement on exporting condition of some electronic components through Electronic product purchase support policy(China) and expanding demand on Digital TV.
. Thirdly, Increase in Market Share by reinforcing the AS condition.
. Fourthly, strengthening price competitiveness stemming from the Won/Dollar exchange rate.


3. Domestic Economic Recovery Phase: Forecast to "Root-shaped(√)" recovery
- The speed of Korean Economic Recovery is expected to be steady slow compared to the initial phase.
. Firstly, Limit on improvement of Korea's exporting condition due to slow economic recovery process of U.S.
. Secondly, Temporary instability of Financial Market regarding the major countries' exit strategy which will be attainable after the fourth quarter.
. Thirdly, forecast to more sluggish domestic demand recovery than the exporting recovery.
. Lastly, forecast to dwindle fiscal contribution to the growth due to weakening its fiscal capability to execute after the second half of this year.
- Signs of "Root-shaped(∇)" economic recovery looming larger
. This recovery pattern is similar to the one Korea experienced since Sept. 1980 (The third cyclical phase of business upturn) due to the concerted impact of second oil shock. Although market rally is presented in its initial stage, after then, the economy showed steady upward curve for certain period.
. After temporary turnaround on domestic economy by massive stimulus package, gradual exit policy and increase in raw material cost induce slower recovery to be continued.