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Korea Economy Under Warning Sign

Posted February. 20, 2003 23:10,   


Korea economy is now facing a great difficult. Monthly trade account recorded deficit this year for the first time in 3 years and unemployment rate is surging.

In addition, international oil price is continuously rising and unstable price is also serious. Given that domestic consumption and investment have been already frozen, it is safe to say that all the fields of economy are now on alert.

Jung Mun-soo, director of Samsung Economy Research Institute, said, “ There is high possibility that this deficit trend will continue for at least the first quarter of the year because external conditions are uncertain and domestic consumption is also shrinking. He added, “We cannot also rule out the possibility that Korea economy will experience a double dip phenomenon.

Economic experts pointed out that We cannot afford to downplay the seriousness of the problem and should deal with it in very stern way.

▽ Deficit in three years = Last month, for the first time in 3 years, trade account recorded deficit and it is expected to continue this month too.

According to a report by Customs Service, last month`s trade account marked a deficit of 87million dollars. This is the first monthly deficit since January, 2000.

Earlier this month, an estimate announced by Ministry of Industry and Resource Ministry said that trade account was 48 million dollar surplus, but final version of estimate confirmed other wise.`

And while export from January first to 19th estimated by Ministry of Industry and Resource Ministry was just about 7.3 billion dollar, import recorded more than 9billion dollar, about 1.8 billion dollars more than export.

Park Bong-gue, in charge of trade policy in Ministry of Industry and Resource Ministry said, “ it is likely that export in February will record just 13.5 billion dollars and import will mark 14 billion dollars, meaning a deficit of more than 500 million dollars.”

Ñ Rising unemployment, particularly among fresh graduates out of college = As the economy has frozen rapidly these days, employment is worsening a lot.

According to employment figure for January, released on the same day, the number of employees has decreased 2.2 % to 21,562,000 in January from the previous month, while the number of the unemployed rose 12.4 % to 789,000.

As a result, unemployment rate of January was up 0.4 percentage point to 3.5 % in the first month of this year, which is the highest since September last year.

In particular, this phenomenon is a big problem among those in their twenties. Unemployment in this age bracket was 8.1 % in January, up 1.5 percentage points from the previous month, highest figure since March in 2001. This figure is more than twice the average unemployment. The number of those in their twenties without jobs reached 66,000 in January.

The reason is that the economy has contracted and companies turned to hiring those with experience.

Ñ Skyrocketing oil prices and rapid increase in consumer prices = Amid the U.S.`s aggressive attitude toward Iraq, the price of Western Texas Intermediate rose through the 37 dollar level to a 12 year high.

According to the Korea petroleum corporation, on Feb 20, the WTI was traded at 37.17 dollars per barrel, up 0.30 dollar from the previous day, which is the highest figure since the Gulf War in 1990.

Dubai, Korea`s main import, also increased to 30.27 dollars, up 0.56 dollar from the previous day.

The rising crude oil prices started to affect domestic prices directly.

According to the bank of Korea`s prices for January, prices of raw materials and intermediate goods rose 1.0% from the previous month, up 5.6 % from the same period of last year.

As to prices of raw materials, imported farming and fisheries products are supposed to decrease this time, but due to rising oil prices, those products` prices also increased 3.1% from the previous month. Intermediate goods rose 0.7 %. And this is analyzed to be resulted from increase in international oil prices and raw material prices.