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Deepening Economic Woes

Posted March. 14, 2008 03:05,   


As seen in the rising unemployment rate and the increase in the number of unsold apartments, which recently reached a new high since the 1997-98 financial crisis, Korea’s economic woes are deepening.

Worse yet, prices are expected to keep rising due to soaring international oil prices and the surging won-dollar exchange rate. Stock prices have also dropped.

The Korea National Statistical Office announced on March 13 that the number of the economically inactive population in resting reached 1.63 million as of February this year, surpassing the 1.6 million mark for the first time since 2003 when the agency began collecting relevant data.

The number of those who have been job-hunting unsuccessfully rose to 607,000, unprecedentedly exceeding the 600,000 mark in February.

In sum, the number of economically inactive people (which include 819,000 of unemployed people, those who are not actively seeking employment and those preparing for employment) reached 3.05 million as of February, up 83,000, or 2.8 percent, from a year ago when the number stood at 2.97 million.

As more and more newly built apartments have failed to find potential buyers, concerns have been mounting over possible chain reaction bankruptcies of smaller constructors without enough capital.

The Ministry of Land, Transport and Marine Affairs announced March 13 that the number of unsold apartments reached a record-high of 123,371 as of late January 2008, surpassing the previous record of 116,433 set in July 1998 when the nation was suffering from the financial crisis.

What’s more worrisome is that increasingly more apartments are being left unsold even after the completion of construction and that the number of unsold apartments has sharply increased in Seoul and the metropolitan area which usually enjoy surging demand for housing. Due to the dollar’s depreciation, international oil prices even exceeded $110 per barrel on Thursday.

On the New York Mercantile Exchange, West Texas Intermediate for April delivery increased $1.17 (1.1 percent) to set a new high of $109.92 per barrel on Wednesday. At one point, WTI futures even soared to $110.20 per barrel during the day.

Worse yet, the rapidly depreciating won is likely to further raise consumer prices.

At the Seoul foreign exchange market, the won-dollar exchange rate jumped 11.10 won to close at 982.4 won yesterday, rising for the 10th consecutive day and surpassing 980 won per dollar for the first time in two years.

At 3 p.m. Thursday, the won surged 37.2 won from a day ago to reach 980.4 won to 100 yen, surpassing the 980 won per 100 yen mark for the first time in 37 months since Feb. 7, 2006 when 100 yen were exchanged for 983.4 won.

In the wake of the surging won-dollar exchange rate and stock market crash in the U.S. a day ago, the nation’s benchmark KOSPI plunged 43.21 points (2.6 percent) on Thursday to close at 1,615.62 and the tech-heavy KOSDAQ index dropped 9.48 points (1.5 percent) to 621.81.

jefflee@donga.com higgledy@donga.com