Gross National Income on the Decline for Past Four Years

It was reported recently that national consumption overall has dropped alongside the decrease in the country’s Gross National Income.

According to GNI estimates for the first quarter released by the Bank of Korea on June 13, the GNI for the first quarter went down by 1.8 percent compared to the same period last year, showing record lows since the horrendously low negative 7.2 percent in the fourth quarter of 1998.

The total savings rate was also recorded at 26 percent, which is the lowest in 18 years.

The reason why the real GNI rate for the first quarter turned out to be less than that of the real GDP growth rate of 3.7 percent is because national purchasing power has significantly weakened due to worsening trade conditions.

Low trade conditions were found to have been caused by decreased price competitiveness as import prices went up compared to export prices.

Real trade deficit caused by that phenomenon in the first quarter amounts to 23 trillion and 910 billion won.

Both have shown negative figures for the 9th consecutive year since 1995, revealing how the financial picture has worsened.

If real GNI is lower than the GDP growth rate, people generally feel worse about the real economy.

The total amount of savings around the nation stood at 26 percent, down by 0.8 percent points compared to the same period last year. This is the lowest since the record 25.5 percent in the first quarter of 1986. This is attributed to the fact that more money was spent than earned.

The national gross investment rate went up by 2.6 percent to 26.1 percent due to construction rather than facility investment.

The GDP deflator, or the composite consumer price index for the nation’s economy, increased by 2.3 percent from the previous year due to a drop in foreign exchange rates (increase in the won’s value).

“In May, trading conditions improved,” said Ahn Yong-sung, National Income Statistics Team Chief at the Bank of Korea. “The real GNI will improve in the second quarter of this year.”

Kwu-Jin Lim mhjh22@donga.com