economic bulletin (vol. 35 no. 4)

7/28/2019 Economic Bulletin (Vol. 35 No. 4)

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ECONOMICBULLETIN

Republic of Korea

April 2013Vol.35 No.4

ISSN 2287-7266

| Economic In ormation and Education Center

The Green Book:Current Economic Trends

Policy IssuesPark Geun-hye Administrations Economic Policy Directions for 2013

Supplementary Budget of 17.3 Trillion Won Proposed

Economic News BriefngKorea Grows 2.0% in 2012Government Structure ReorganizedHousing Market Boosting Measures UnveiledKorea, China and Japan Hold First Round of FTA Talks

Statistical Appendices

03

50

60

65


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Economic BulletinRepublic o Korea

April 2013Vol.35 No.4

The Green Book: Current Economic TrendsOverview1. External economic situation2. Private consumption3. Facility investment

4. Construction investment5. Exports and imports6. Mining and manufacturing production7. Service sector activity8. Employment9. Financial markets

9.1 Stock market9.2 Exchange rate9.3 Bond market9.4 Money supply & money market

10. Balance of payments11. Prices and international commodity prices

11.1 Prices11.2 International oil and commodity prices

12. Real estate market12.1 Housing market12.2 Land market

13. Composite indices of business cycle indicators

Policy IssuesPark Geun-hye administrations economic policy directions for 2013Supplementary budget of 17.3 trillion won proposed

Economic News Briefng

Statistical Appendices

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Contents


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3 The Green Book |

Te Green Book Current Economic Trends

Te Korean economy has seen in ation remain stable, with economic indicators such as serviceoutput and investment improving. However, employment growth has been slowing down, whileproduction and consumption continue to all.

aking into account the Lunar New Year e ect, major indicators o the real economy, includingproduction, consumption and investment, have been sluggish in the rst two months o 2012.

In February, the economy added 201,000 jobs year-on-year, down rom 322,000 in the previousmonth, while the employment and unemployment rates remain weak.

Consumer price in ation stayed stable in the 1.0 percent range in March, alling to 1.3 percentrom the previous months 1.4 percent, as agricultural product prices ell due to improving weatherconditions and personal service prices declined due to the expansion o childcare subsidies.

Mining and manu acturing production ell 0.8 percent month-on-month in February due toweakness in the semiconductor sector, while service output increased by 1.7 percent led by realestate & renting.

Meanwhile, the average month-on-month growth rate or mining and manu acturing productionin January and February was 0.1 percent, which was low compared to 2.9 percent posted in theourth quarter o 2012. Te average monthly growth rate or service output in the rst two monthso the year was also 0.1 percent, nearly on par with the ourth quarter o 2012, when the averagegrowth rate was 0.0 percent.

Despite an increase in durable and semi-durable goods sales, retail sales in February ell 0.1percent rom the previous month due to a decrease in nondurable goods sales. In January andFebruary, retail sales declined by an average o 1.6 percent, whereas in the ourth quarter o theprevious year retail sales had increased by an average o 0.4 percent.

Facility investment in February rose 6.5 percent month-on-month due to strong machinery andtransportation equipment investment. However, acility investment declined by an average o 1.8percent in January and February, while it had grown 0.8 percent in the ourth quarter o 2012.

Construction investment went up 7.0 percent, led by an improvement in building constructionand civil engineering works. Te January-February average growth rate was 5.2 percent, postingan improvement rom 1.4 percent in the ourth quarter o the previous year.

Overview


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4 | The Green Book

Although the US economy shows signs o moderate recovery, external risks remain,such as scal anxiety in the US, political uncertainty in Italy and the a ermath o the bailout o Cyprus.

Te US averted a government shutdown when Congress passed the budget plan orFiscal Year 2013, but anxieties remain as the suspension o the debt ceiling is dueto end on May 19.

Te eurozone crisis persists due to the possibility o contagion stemming rom theprolonged political vacuum in Italy* and the bailout agreement over Cyprus**.

* Fitch Ratings cut Italys sovereign credit rating rom A- to BBB+, citing political uncertainty and diminishing prospects o additional structural re orm.

** Te EU agreed on March 25 to provide 10 billion euros in bailout loans to Cyprus and requirethe nation to undergo restructuring o its banking sector. Te original bailout agreementreached on March 15 included plans to levy a tax on bank deposits, but the terms wererenegotiated a er Cypruss lawmakers rejected the bailout package amid opposition withinthe nation.

1.Externaleconomic

situation

Exports rose 0.4 percent year-on-year in March, thanks to the strong per ormance o I -relateditems including mobile phones and semiconductors. Te trade balance remained in the black atUS$3.36 billion.

Te cyclical indicator o the coincident composite index rose 0.1 point percent month-on-month

in February, and the leading composite index ell 0.1 point.

In March, both the stock prices and the won ell, as geopolitical risks related to North Koreaescalated, uncertainties over the eurozone spread, and oreign investors became net sellers o Korean stocks.

Te decline in housing prices slowed rom 0.2 percent to 0.1 percent in March, while the upwardtrend in rental prices accelerated rom 0.3 percent to 0.5 percent.

Uncertainties linger both at home and abroad due to scal anxiety in the US, slow economic

recovery in Europe and risks concerning North Korea. Meanwhile, the domestic economy remainsstagnant due to weak consumption and sluggish investment.

Te Korean government will closely watch the global and domestic economic situations, andrein orce policy responses by aggressively managing macroeconomic policies.

At the same time, the government will ocus on securing the lives o the low- and middle-incomeclasses through job creation and by stabilizing the prices o necessities, while continuing to adoptpolicies to improve the health o the economy.


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5 The Green Book |

Te US growth rate in the ourth quarter o 2012 was revised upward to 0.4 percentand major economic indicators such as industrial production and retail sales haveimproved in the rst two months o 2013, but business sentiment and job data haveslumped in March.

Te growth rate adjustment re ects accelerating growth in business and housinginvestment.

Growth rate (adjusted[ nal, %)0.1[ 0.4 (GDP), 2.1[ 1.8 (private consumption), 9.7[ 13.2 (business investment),17.5[ 17.6 (housing investment), -3.9[ -2.8 (exports), -6.9[ -7.0 (government spending)

Industrial production and retail sales both rose at a aster than expected pace inFebruary. Industrial production rose 0.7 percent month-on-month, up rom theinitial estimate o 0.4 percent, while retail sales increased 1.1 percent rom theprevious month, exceeding expectations o 0.5 percent.

Te housing market continued to recover as housing prices continued to rise orthe 12th consecutive month and existing home sales in February increased by 0.8percent month-on-month.

Case-Shiller Home Price Index (percentage change rom the previous period)-0.4 (Q1 2012)[ 2.3 (Q2 2012)[ 1.7 (Q3 2012)[ 1.8 (Q4 2012), 1.0 (Jan 2012)

Meanwhile, the ISM Manu acturing Index declined in March, registering below the expected 54.0.

ISM Manu acturing Index (base=50)50.5 (Jul 2012)[ 50.7 (Aug)[ 51.6 (Sep)[ 51.7 (Oct)[ 49.9 (Nov)[ 50.2 (Dec)[ 53.1 (Jan2013)[ 54.2 (Feb)[ 51.3 (Mar)

Although the unemployment rate ell to 7.6 percent, non arm payroll growth ell

short o expectations by a signi cant margin(190,000 [ 88,000)and the labororce participation rate ell to the lowest since May 1979.

US

World GDP growth

6

5

4

3

2

1

0

-1

(%)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


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6 | The Green Book

Non arm payroll increase (m-o-m, thousand)153 (Jul 2012)[ 165 (Aug)[ 138 (Sep)[ 160 (Oct)[ 247 (Nov)[ 219 (Dec)[ 148 (Jan2012)[ 268 (Feb)[ 88 (Mar)

Labor orce participation rate (%)63.7 (Jul 2012)[ 63.5 (Aug)[ 63.6 (Sep)[ 63.8 (Oct)[ 63.6 (Nov)[ 63.6 (Dec)[ 63.6 (Jan2012)[ 63.5 (Feb)[ 63.3 (Mar)

(Percentage change from previous period)

2010 2011 2012 2013

Annual Annual Q4 Annual Q1 Q2 Q3 Q4 Jan Feb Mar

Real GDP 2.4 1.8 4.1 2.2 2.0 1.3 3.1 0.4 - - -

- Personal consumption expenditure 1.8 2.5 2.0 1.9 2.4 1.5 1.6 1.8 - - -

- Corporate ixed investment 0.7 8.6 9.5 7.7 7.5 3.6 -1.8 13.2 - - -

- Housing construction investment -3.7 -1.4 12.1 11.9 20.5 8.5 13.5 17.6 - - -Industrial production 5.3 4.1 0.9 3.8 1.4 0.6 0.0 0.6 0.1 0.7 -

Retail sales 5.5 8.0 1.9 5.0 1.7 -0.3 1.3 1.5 0.2 1.1 -

Existing home sales -3.4 2.4 2.8 9.9 5.5 -2.0 5.1 3.3 0.8 0.8 -

Unemployment rate 9.6 9.0 8.7 8.1 8.3 8.2 8.1 7.8 7.9 7.7 7.6

Consumer prices 1.6 3.2 0.2 2.1 0.6 0.2 0.6 0.5 0.0 0.7 -

1. Preliminary2. Annualized rate (%)3. Seasonally adjustedSource: US Department of Commerce

US GDP growth and industrial productionSource: US Department o Commerce & US Federal Reserve Board

10

8

6

4

2

0

-2

-4

-6

-8

-10

GDP (q-o-q, annualized rate) Industrial production (q-o-q)

2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1


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7 The Green Book |

Te Chinese economy continues to gradually recover, with exports registeringdouble-digit growth or two straight months. However, there are increasingconcerns that the recovery momentum may lose steam, as domestic consumptiongrowth had slowed down in the rst two months o 2013.

Exports are continuing to show signs o improvement, with exports in January andFebruary growing 23.6 percent compared to the same period o the previous year.However, domestic consumption growth is slowing, with industrial production

and retail sales rising 9.9 percent and 12.3 percent, respectively.Meanwhile, the lower than expected manu acturing PMI*, real estate regulationsand concerns over bird u in ections** may hamper economic recovery in thecoming days.

* Te manu acturing PMI in March rose 0.8 points month-on-month to 50.9. Tis is lower thanmarket expectations(51.2)and past trends(March PMI was usually 3.0 points higher than that in February).

** As o April 7, 21 people have been in ected with bird u in China, o which six have died.

China

US non arm payroll growth and unemployment rateSourse : US Department o Labor

800

600

400

200

0

-200

-400

-600

-800

-1,000

12

10

8

6

4

2

0

US nonfarm payroll growth (m-o-m, left) Unemployment rate (right)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

(Percentage change from same period in previous year)

2011 2012 2013Annual Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb

Real GDP 9.3 9.1 8.9 7.8 8.1 7.6 7.4 7.9 - - -Industrial production 13.9 13.8 12.8 10.1 11.6 9.5 9.1 10.0 10.3 - 9.93

Fixed asset investment (accumulated) 24.8 24.9 23.8 20.6 20.9 20.4 20.5 20.6 20.6 - 21.23

Retail sales 17.1 17.3 17.5 14.3 14.9 13.9 13.5 14.9 15.2 - 12.33

Exports 20.7 20.7 14.4 8.3 8.8 10.5 4.5 9.5 14.1 25.0 21.8Consumer prices 5.4 6.3 4.6 2.6 3.8 2.8 1.9 2.1 2.5 2.0 3.2Producer prices 6.0 7.1 3.1 -1.7 0.1 -1.4 -3.3 -2.3 -1.9 -1.6 -1.61. Preliminary2. Quarterly change: average of monthly change

3. Jan-Feb aggregateSource: China National Bureau of Statistics


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8 | The Green Book

Te Japanese economy continues to tread on thin ice, with the trade balanceregistering a de cit or the eighth straight month in February due to sluggishexports, and industrial production contracting. Trade account balance (billion yen)-529 (Jul 2012)[ -768 (Aug)[ -568 (Sep)[ -556 (Oct)[ -957 (Nov)[ -646 (Dec)[ -1,631(Jan 2013)[ -779 (Feb)

Retail sales rose 1.6 percent rom the previous month, but declined 2.3 year-on-year.

De ation persisted even though import prices were up 13.2 percent year-on-year,with consumer prices alling 0.7 percent rom the same period o the previous year.

Japan


2011 2012 2013

Annual Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb

Real GDP -0.6 2.5 0.1 2.0 1.5 -0.2 -0.9 0.0 - - -Industrial production -2.4 4.3 -0.4 -0.3 1.2 -2.0 -4.2 -1.9 2.4 0.3 -0.1

Retail sales -1.2 0.5 -0.5 1.6 1.2 0.3 -0.9 -0.2 0.0 -0.2 1.6

Exports (y-o-y) -2.6 0.5 -5.5 -2.8 -1.6 4.8 -8.2 -5.5 -5.8 6.4 -2.9

Consumer prices (y-o-y) -0.2 0.0 -0.2 -0.1 0.5 -0.2 -0.3 -0.1 -0.1 -0.3 -0.7

1. PreliminarySources: Japan's Cabinet Office, Ministry of Economy, Trade and Industry, Ministry of Finance, Statistics Bureau of Japan

Chinas GDP growth and xed asset investmentSource: National Bureau o Statistics o China

18

16

14

12

10

8

6

4

70

60

50

40

30

20

10

0

(%) (%)

2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1

GDP (y-o-y, left) Fixed asset investment (accumulated, y-o-y, right)


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9 The Green Book |

Japans GDP growth and industrial productionSource: Japans Cabinet Ofce, Ministry o Economy, Trade and Industry

6

4

2

0

-2

-4

-6

25

20

1510

5

0

-5

-10

-15

-20

-25

(%) (%)

2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1

GDP (q-o-q, left) Industrial production (q-o-q, right)

Te eurozone economy remained weak in February, with the unemployment ratereaching a record high level o 12.0 percent and the manu acturing PMI allingbelow its baseline o 50 or the 20th consecutive month.

Unemployment rate (%)11.4 (Jul 2012)[ 11.5 (Aug)[ 11.6 (Sep)[ 11.7 (Oct)[ 11.8 (Nov)[ 11.8 (Dec)[ 12.0 (Jan2013)[ 12.0 (Feb) (youth unemployment: 23.9%)

Manu acturing PMI (base = 50)44.0 (Jul 2012)[ 45.1 (Aug)[ 46.1 (Sep)[ 45.4 (Oct)[ 46.2 (Nov)[ 46.1 (Dec)[ 47.9 (Jan2013)[ 47.9 (Feb)[ 46.6 (Mar)

Eurozone


2010 2011 2012 2013Annual Annual Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb

Real GDP 2.0 1.4 -0.3 -0.5 0.0 -0.2 -0.1 -0.6 - - -Industrial production 7.4 3.5 -2.1 -2.4 -0.5 -0.5 0.4 -2.4 0.9 -0.4 -Retail sales 0.9 -0.5 -1.2 -1.7 -0.3 -0.8 0.0 -1.5 -0.8 1.2 -0.3Exports (y-o-y) 20.1 12.7 8.3 7.4 8.6 8.1 7.4 5.5 -3.1 5.0 -Consumer prices (y-o-y) 1.6 2.7 2.9 2.1 2.7 2.7 2.5 2.3 2.2 2.0 1.81. PreliminarySource: Eurostat


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10 | The Green Book

Private consumption in the ourth quarter(preliminary GDP)o 2012 increased 0.8percent quarter-on-quarter and 2.7 percent year-on-year.

2.Privateconsumption


2011 2012Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4

Private consumption 2.4 0.7 0.6 0.1 -0.2 1.7 0.8 0.4 0.7 0.8(y-o-y) - 3.2 3.1 2.1 1.2 - 1.3 1.0 1.7 2.71. Preliminary2. National accountsSource: The Bank of Korea

Despite an increase in sales o durable goods, such as automobiles, and semi-durable goods, such as clothes, retail sales ell 0.1 percent month-on-month inFebruary, as sales o nondurable goods, including car uel, decreased. On a year-on-year basis, however, retail sales rose 1.8 percent.

Durable goods sales rose 3.2 percent as automobile sales recovered a er takinga sharp dive in January due to the expiration o the individual consumption taxcut. Semi-durable goods sales also rose 1.9 percent, led by demand or clothes.However, nondurable goods sales dropped 2.7 percent due to poor car uel sales

resulting rom a rise in gasoline prices and diminished outdoor activities caused by heavy snow alls and the cold weather.

Eurozones GDP growth and industrial productionSource: Eurostat

3

2

1

0

-1

-2

-3

10

8

64

2

0

-2

-4

-6

-8

-10

(%) (%)

2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1

GDP (q-o-q, left) Industrial production (q-o-q, right)


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11 The Green Book |

Private consumptionSource: The Bank o Korea (national accounts)

14

12

108

6

4

2

0

-2

-4

-6

(%)

2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1

Private consumption (y-o-y) Private consumption (q-o-q)


2011 2012 20131

Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb

Retail sales 4.5 1.4 0.8 0.5 0.0 2.3 1.0 0.3 1.2 0.4 0.4 -2.2 -0.1

(y-o-y) - 5.3 6.2 4.0 2.6 - 2.8 1.4 2.6 2.5 2.0 -3.1 1.8

- Durable goods 10.6 3.8 0.5 0.7 -0.9 5.3 2.5 1.9 2.8 2.3 2.9 -7.8 3.2

Automobiles 7.0 5.2 -3.3 4.6 -11.3 2.4 2.4 9.4 -1.6 9.0 3.8 -13.8 3.8

- Semi-durable goods 3.7 0.9 1.4 1.7 -2.7 -1.1 -0.4 0.3 -1.1 1.7 0.0 -0.5 1.9

- Nondurable goods 2.1 0.4 0.6 -0.1 1.6 2.3 0.9 -0.6 1.5 -1.1 -0.8 0.0 -2.7

1. Preliminary2. Durable goods: Automobiles, electronic appliances, furniture, telecommunications devices, etc.3. Semi-durable goods: Clothing, footwear, etc.4. Nondurable goods: Food, medicine, cosmetics, fuel, tobacco, etc.Source: Statistics Korea

Retail salesSource: Statistics Korea (industrial activity trend)

25

20

15

10

5

0

-5

-10

(%)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Consumer goods sales (m-o-m)Consumer goods sales (y-o-y)

2010. 1 2011. 1 2012. 1 2013. 1


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13 The Green Book |

(y-o-y, %)

2012 2013Aug Sep Oct Nov Dec Jan Feb Mar

Credit card sales 8.0 15.7 9.2 14.2 7.1 6.2 3.4 5.6Department store sales -6.9 -0.8 -0.4 9.1 -0.2 -8.2 1.7 5.9Large discount store sales -3.3 0.2 -6.6 -1.7 -5.0 -24.6 8.9 -4.5Domestic sales o gasoline -2.7 1.6 7.9 3.7 -2.8 2.9 -8.0 7.3Domestic sales o cars -20.2 -3.1 4.3 13.2 7.5 1.6 -13.5 -1.0

Sources: Credit Finance Association of Korea, Ministry of Knowledge Economy, Korea National Oil Corporation, Korea Automobile Manufacturers AssociationMinistry of Strategy and Finance (for March data)

Department store and discount store sales (current value)Source: Ministry o Trade, Industry and Energy (monthly retail sales)

40

30

20

10

0

-10

-20

-30

(y-o-y, %)

Department store sales Discount store sales

2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

Domestic sales o carsSource: Korea Automobile Manu acturers Association (monthly automobile industry trend)

180

160

140

120

100

80

60

100

80

60

40

20

0

-20

-40

-60

(thousand) (y-o-y, %)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

Domestic car sales growth (right)Domestic car sales (left)

Gasoline prices (won/liter)1,988 (4th week Jan)[ 1,994 (1st week Feb)[ 1,992 (2nd week)[ 1,985 (3rd week)[ 1,978 (4th week)

Growth in credit card use expanded due to an overall increase in consumption.


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14 | The Green Book

Consumption has been constrained due to a slowdown in employment andthe burden o household debt, but it may show gradual improvement as thegovernments policies or economic revitalization take e ect.

Employment growth has been slowing since the ourth quarter o 2012, householdscontinue to su er rom the burden o debt repayments, and the individualconsumption tax cut on automobiles has expired, leading to a slowdown inconsumption.

Employment growth (y-o-y, thousand)467 (Q1 2012)[ 430 (Q2)[ 506 (Q3)[ 342 (Q4), 322 (Jan 2013)[ 201 (Feb)

Interest costs compared with household income (%)1.7 (2007)[ 1.9 (2008)[ 2.0 (2009)[ 2.1 (2010)[ 2.3 (2011)[ 2.3 (2012)

However, consumption may be boosted by stable prices and satis actory consumersentiment, and also when the governments policies result in job creation,housing market stabilization and rein orcement o the role o public nances.

Consumer price in ation (y-o-y, %)1.5 (Jul 2012)[ 1.2 (Aug)[ 2.0 (Sep)[ 2.1 (Oct)[ 1.6 (Nov)[ 1.4 (Dec)[ 1.5 (Jan 2013)[ 1.4 (Feb)[ 1.3 (Jan)

Consumer Sentiment Index (CSI, base=100)100 (Jul 2012)[ 101 (Aug)[ 99 (Sep)[ 100 (Oct)[ 100 (Nov)[ 99 (Dec)[ 102 (Jan 2013)[ 102 (Feb)[ 104 (Mar)

Consumer sentiment indexSource: The Bank o Korea

130

120

110

100

90

80

70

(base=100)

2001. Q1 2004. Q1 2007. Q1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


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16 | The Green Book

Te acility investment index in February increased 6.5 percent month-on-monthas both machinery and transportation equipment investment improved. Teindex ell 18.2 percent year-on-year. In the rst two months o the year, the indexdeclined by an average o 1.8 percent, compared with the ourth quarter o 2012, inwhich the average monthly growth rate was 0.8 percent.

(Percentage change from previous quarter)

2010 2011 2012 2013

Annual Annual Annual Q1 Q2 Q3 Q4 Dec Jan Feb

Facility investment index 25.8 4.0 -2.0 6.4 -5.0 -6.8 0.8 6.3 -8.7 6.5

(y-o-y) - - - 10.7 -2.7 -8.2 -6.9 -6.3 -15.6 -18.2

- Machinery 30.2 2.7 -2.2 8.1 -5.5 -6.9 -3.8 2.7 -6.4 6.9

- Transportation equipment 8.9 9.8 -1.1 -1.0 -1.8 -6.7 22.0 21.2 -16.7 5.9

1. PreliminarySource: Statistics Korea


2010 2011 2012 2013


Domestic machinery orders 8.0 7.6 -13.4 -1.1 -19.8 -10.4 -21.5 -17.0 -6.0 -32.7

(q-o-q, m-o-m) - - - -5.3 -18.7 -2.0 3.9 -0.3 1.9 -1.3

- Public -45.7 -2.6 -11.0 126.1 -59.7 86.7 -54.6 31.2 155.1 -77.1

- Private 22.3 8.8 -13.6 -8.7 -15.1 -16.0 -15.1 -21.8 -10.4 -16.0

Machinery imports 40.4 7.1 -3.0 15.3 -4.3 -12.2 -8.2 -7.5 -4.4 -23.4

Average manu acturing operation ratio 80.3 80.2 78.1 79.6 79.0 76.2 77.8 78.4 78.7 77.8

Facility investment adjustment pressure 8.8 1.1 -1.4 0.7 -1.3 -3.0 -1.5 -1.8 6.9 -10.8

1. Preliminary2. Production growth rate minus production capacity growth rate in the manufacturing sector (%p)Sources: Statistics Korea, Korea International Trade Association

Te improving consumer sentiment may bode well or acility investment, but poorleading indicators, such as machinery orders and acility investment adjustmentpressure, may act as negative actors.

Business survey index or manu acturing sector (Bank o Korea)

81 (Jul 2012)[ 70 (Aug)[ 75 (Sep)[ 72 (Oct)[ 70 (Nov)[ 67 (Dec)[ 70 (Jan 2013)[ 72(Feb)[ 76 (Mar)[ 80 (Apr)


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17 The Green Book |

Machinery orders and machinery importsSource: Korea International Trade Association (KITA), Statistics Korea

10

9

8

7

6

5

4

3

2

70

60

50

40

30

20

10

0

-10

-20

-30

-40

-50

(trillion won) (y-o-y, %)

2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1

Machinery orders (left) Machinery imports (right)

Construction investment(preliminary GDP)in the ourth quarter o 2012 decreased1.2 percent quarter-on-quarter and 4.2 percent year-on-year.


2010 2011 2012Annual Annual Q3 Q4 Annual Q1 Q2 Q3 Q4

Construction investment -3.7 -4.7 -0.4 0.1 -2.2 -1.5 -1.3 0.7 -1.2(y-o-y) - - -3.6 -1.7 - -0.4 -3.1 -0.3 -4.2- Building construction -1.6 -2.7 -0.3 -1.0 -1.7 0.3 -2.6 0.1 -0.3- Civil engineering works -6.2 -7.3 -0.7 1.5 -2.9 -3.9 0.4 1.5 -2.41. Preliminary2. National accountsSource: The Bank of Korea

4.Constructioninvestment

Te value o construction completed(constant) in February increased 7.0 percentmonth-on-month and 5.1 percent year-on-year, led by an improvement in buildingconstruction and civil engineering works. Te January-February average growthrate o the value o construction completed improved rom that o the ourthquarter o 2012, surging rom 1.4 percent to 5.2 percent.


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18 | The Green Book

Construction investment by typeSource: The Bank o Korea (national accounts)

50

40

30

20

10

0

-10

-20

-30

(y-o-y, %)

2001. 1

Building construction Residential buildings Civil engineering works

2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1

Construction investmentSource: The Bank o Korea (national accounts)

20

15

10

5

0

-5

-10

-15

(%)

2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1

Construction investment (y-o-y)Construction investment (q-o-q)


2010 2011 2012 2013Annual Annual Annual Q1 Q2 Q3 Q4 Dec Jan Feb

Construction completed (constant) -3.2 -6.4 -5.8 -5.6 -0.9 1.0 1.4 2.1 -0.2 7.0(y-o-y) - - - -4.9 -9.7 -2.3 -5.6 -8.3 8.9 5.1

- Building construction -7.0 -6.9 -7.6 -4.5 -4.8 1.0 1.8 3.0 1.9 7.6- Civil engineering works 2.2 -5.6 -3.5 -6.9 4.1 0.9 1.0 1.1 -2.7 6.21. PreliminarySource: Statistics Korea


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19 The Green Book |

(Percentage change from same period in previous year)

2010 2011 2012 2013


Construction orders (current value) -17.7 6.1 -8.9 33.3 -0.7 -13.6 -33.1 -43.0 -52.7 -46.4

(q-o-q, m-o-m) - - - 15.1 -14.8 -6.1 -20.4 -10.8 -23.7 59.6- Building construction -8.9 14.0 -8.7 27.4 -7.0 -7.1 -27.4 -37.5 -65.1 -7.1

- Civil engineering works -28.3 -6.0 -9.3 42.0 12.5 -26.3 -43.7 -51.6 -22.6 -72.6

Building permit area 19.3 9.9 -0.5 8.7 1.2 -7.3 -2.3 9.2 -4.8 -17.6

1. PreliminarySources: Statistics Korea, Ministry of Land, Infrastructure and Transport

Construction investment is expected to continue to su er due to poor leadingindicators such as construction orders and building permit area.

However, the housing market stabilization measures announced on April 1 may boost housing transactions and have a positive e ect on construction investment.

Housing transaction growth (y-o-y, %)-22.1 (Jul 2012)[ -34.6 (Aug)[ -44.3 (Sep)[ -15.2 (Oct)[ -8.0 (Nov)[ 2.4 (Dec)[ -5.7(Jan 2013)[ -14.2 (Feb)

Leading indicators o construction investment

Source: Statistics Korea (construction orders)Ministry o Land, In rastructure and Transport (building construction permit area)

340

290

240

190

140

90

40

-10

-60

-110

(y-o-y, %)

2001. 1

Construction orders Building permit area

2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


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20 | The Green Book

5.Exports andimports

Exports in March increased 0.4 percent(preliminary) year-on-year to US$47.50billion.

Despite the act that there was one ewer working day compared to the sameperiod o the previous year, exports increased thanks to the strong per ormance o

I -related items such as mobile phones and semiconductors.Export growth by item (y-o-y, %)22.9 (mobile phones), 6.5 (semiconductors), 3.9 (petroleum products), -10.4 (automobiles), 2.9(automobile parts), -13.2 (steel), -12.5 (vessels)

Average daily exports, an indicator adjusted to days worked, amounted to US$2.11billion, up 4.8 percent year-on-year and posting growth or the h straight monthsince November 2012.

Average daily export growth (y-o-y, %)

-2.4 (Sep 2012)[ -1.2 (Oct)[ 3.9 (Nov)[ 7.1 (Dec)[ 1.6 (Jan 2013)[ 2.5 (Feb)[ 4.8 (Mar)

Average daily exports (US$ billion)2.01 (Mar 2012), 1.97 (Q1)[ 2.10 (Q2)[ 1.90 (Q3), 1.90 (Jan 2013)[ 2.07(Feb)[ 2.11 (Mar)

Exports to China and the ASEAN countries continued to show robust growth, butexports to the US, EU and Japan remained weak.

Export growth by region (y-o-y, %)6.2 (China), 17.5 (ASEAN countries), -8.4 (EU), -15.4 (US), -18.0 (Japan)

In the rst quarter o 2013, exports inched up 0.5 percent year-on-year despitea decrease in days worked(1.5 days), while average daily exports increased 2.7percent.

Exports by typeSource: Korea Customs Service, Ministry o Trade, Industry and Energy (export and import trend)

160

140

120

10080

60

40

20

0

-20

-40

-60

-80

(y-o-y, %)

2001. 1

Export growth rate Automobiles Semiconductors Steel

2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


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21 The Green Book |

Imports in March dropped 2.0 percent(preliminary) rom the previous year toUS$44.14 billion.

Despite a slight increase in consumer goods imports, imports ell year-on-year ascommodities and capital goods imports declined.

Import growth by category (Mar 1-31, preliminary, y-o-y, %)0.3 (consumer goods), -2.4 (commodities), -2.2 (capital goods)

Imports by typeSource: Korea Customs Service, Ministry o Trade, Industry and Energy (export and import trend)

100

80

6040

20

0

-20

-40

-60

-80

(y-o-y, %)

2001. 1

Import growth rate Commodities Capital goods

2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

(US$ billion)

2012 2013Annual Mar Q1 Q2 Q3 Q4 Jan Feb Mar Q1

Exports 547.87 47.33 134.85 140.13 133.13 139.77 45.70 42.34 47.50 135.54(y-o-y, %) -1.3 -1.5 3.0 -1.7 -5.7 -0.3 10.9 -8.6 0.4 0.5

Average daily exports 2.00 2.01 1.97 2.09 1.90 2.04 1.90 2.07 2.11 2.021. PreliminarySource: Korea Customs Service

(US$ billion)

2012 2013Annual Mar Q1 Q2 Q3 Q4 Jan Feb Mar Q1

Imports 519.58 45.05 133.67 130.43 125.65 129.83 45.20 40.32 44.14 129.66(y-o-y, %) -0.9 -1.1 7.8 -2.8 -6.9 -1.0 3.9 -10.7 -2.0 -3.0Average daily imports 1.90 1.92 1.95 1.96 1.79 1.89 1.88 1.96 1.96 1.941. PreliminarySource: Korea Customs Service


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22 | The Green Book

Exports and importsSource: Korea Customs Service, Ministry o Knowledge Economy (export and import trend)

60

50

40

30

20

10

0

-10

(US$ billion)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Exports Imports

2010. 1 2011. 1 2012. 1 2013. 1

Trade balance

Mining and manu acturing production in February ell 0.8 percent month-on-month and 9.3 percent year-on-year, as weakness in processed metals andsemiconductors & parts o set growth in clothing & ur and medicine & medicalproducts. Te average production growth o January and February registered 0.1percent, down rom 2.9 percent in the ourth quarter o 2012.

Compared to the previous month, production o clothing & ur(up 30.3%), medicine& medical products(up 6.3%)and medical, precision & optical instruments(up6.1%)rose, while production o processed metals(down 6.5%), semiconductors & parts (down 4.0%)and other transportation equipment(down 5.0%)ell.

Compared to a year ago, production o medical, precision & optical instruments(up 1.0%)and petrochemicals(up 0.3%)increased, while production o mechanicalequipment (down 20.7%), processed metal(down 17.5%)and automobiles(down16.5%)went down.

6.Mining andmanu acturingproduction

(US$ billion)

2012 2013

Annual Mar Q1 Q2 Q3 Q4 Jan Feb Mar Q1

Trade balance 28.29 2.28 1.18 9.70 7.47 9.94 0.50 2.02 3.36 5.88

1. PreliminarySource: Korea Customs Service

Te trade balance (preliminary)in March posted a surplus o US$3.36 billion.


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23 The Green Book |

Industrial productionSource: Statistics Korea (industrial activity trend)

50

40

30

20

10

0

-10

-20

-30

(%)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Industrial production (m-o-m) Industrial production (y-o-y)

2010. 1 2011. 1 2012. 1 2013. 1

Te manu acturing inventory-shipment ratio declined by 1.9 percentage pointsmonth-on-month as inventories decreased 2.6 percent and shipments ell 1.0percent.

Inventories o electric equipment(up 3.8%), automobiles(up 2.7%)and groceries(up 2.6%)rose month-on-month, while semiconductors & parts(down 13.2%),mechanical equipment(down 3.9%), and primary metals(down 1.6%)declined.

Shipments o clothing & ur(up 16.0%), audio-visual communications equipment(up 3.3%)and semiconductors & parts(up 1.4%)climbed, while other transportationequipment (down 14.8%), processed metals(down 7.4%)and re ned petroleum(down 5.3%)slipped.

Te average operation ratio o the manu acturing sector ell by 0.9 percentagepoints month-on-month to 77.8 percent.

Shipment and inventorySource: Statistics Korea (industrial activity trend)

10

8

6

4

2

0

-2

-4

-6

-8

-10

(m-o-m, %)

Shipment growth Inventory growth

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


25/83

24 | The Green Book

(Percentage change from previous quarter or month)

2011 2012 2013Annual Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb

Mining andmanu acturingactivity2

Mining production (q-o-q, m-o-m) - -0.7 - 1.7 -0.5 -2.2 2.9 1.6 -1.2 -0.8(y-o-y) 5.9 3.3 0.8 3.6 1.1 -1.0 -0.1 -0.4 7.6 -9.3Manu acturing production (q-o-q, m-o-m) - -0.7 - 1.7 -0.5 -2.3 3.0 1.5 -0.9 -1.2(y-o-y) 6.0 3.5 0.8 3.8 1.0 -1.1 -0.2 -0.5 8.0 -9.8Shipment 5.6 -0.4 0.7 1.8 -0.3 -2.4 2.0 2.2 -0.9 -1.0- Domestic demand 4.0 -1.4 -1.1 0.7 -0.3 -1.4 1.0 1.6 -0.8 -0.4

- Exports 7.7 0.9 3.0 3.2 -0.3 -3.6 3.2 3.1 -1.2 -1.8Inventory3 1.8 1.8 2.3 1.6 -1.8 -3.0 2.3 2.3 1.1 -2.6

Manu acturingactivity

Average operation ratio (%) 80.2 78.8 78.1 79.6 79.0 76.2 77.8 78.4 78.7 77.8Production capacity4 4.9 4.0 2.2 3.1 2.3 1.9 1.3 1.3 1.1 1.0

1. Preliminary2. Including mining, manufacturing, electricity, and gas industry3. End-period4. Percentage change from same period in previous yearSource: Statistics Korea

Although exports o I -related products such as semiconductors and mobilephones improved, mining and manu acturing production may decrease due toproduction disruptions in the automobile industry.

Average daily export growth (y-o-y, %)-6.0 (Aug 2012)[ -2.4 (Sep)[ -1.2 (Oct)[ 3.9 (Nov)[ 7.1 (Dec)[ 1.7 (Jan 2013)[ 2.6(Feb)[ 4.8 (Mar)

Export growth by item (y-o-y, %, Feb[ Mar 2013)semiconductors (0.9[ 6.4), mobiles phones (15.1[ 22.9), automobiles (-16.3[ -10.4)

Average manu acturing operation ratioSource: Statistics Korea (industrial activity trend)

100

90

80

70]

60

50

( %)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


26/83

25 The Green Book |

Service output in February rose 1.7 percent month-on-month due to growth inmost sectors including pro essional, scienti c & technical services, real estate& renting, and wholesale and retail. On a yearly basis, service activity remainedsteady. Te average growth o January and February registered 0.1 percent, similarto that o the ourth quarter o 2012.

Pro essional, scienti c & technical services increased 5.5 percent rom the previousmonth, as growing construction investment boosted construction technology andengineering services.

Real estate & renting grew 5.3 percent month-on-month as housing transactionsrecovered(27,000 in January to 47,000 in February)rom the expiration o theproperty acquisition tax cut.

Despite weakness in retail sales, wholesale & retail rose 1.5 percent comparedto the previous month, as growing acility investment helped wholesale-relatedconsumption such as machinery equipment.

Educational services increased 1.4 percent month-on-month, thanks to a risein overhead spending such as college scholarships and Lunar New Year holiday bonuses in elementary, middle and high schools.

Hotels & restaurants improved or the rst time in our months, rising 1.2 percentrom the previous month.

7.Service sectoractivity

Despite a high base e ect and weakness in pro essional, scienti c & technicalservices, service output is expected to improve in March as rising retail salesand stock transactions could boost wholesale & retail and nancial & insuranceservices.

Average daily stock transactions (trillion won)6.2 (Aug 2012)[ 7.9 (Sep)[ 6.8 (Oct)[ 6.2 (Nov)[ 5.8 (Dec)[ 6.3 (Jan 2013)[ 5.5 (Feb)[ 6.0 (Mar)


Weight2011 2012 20131

Annual Q1 Q2 Q3 Q4Annual Q1 Q2 Q3 Q4 Dec Jan1 Feb1

Service activity index 100.0 3.2 1.2 0.5 1.2 0.0 1.6 0.5 0.1 0.9 0.0 0.5 -1.2 1.7

- Wholesale & retail 21.6 3.8 1.6 1.0 0.4 -0.3 0.7 -0.1 0.6 0.1 0.7 -1.0 -1.7 1.5- Transportation services 8.5 4.5 2.6 -0.4 1.1 -1.3 1.2 1.2 0.2 0.9 0.6 0.8 0.5 -0.6- Hotels & restaurants 7.2 -1.3 -0.4 2.2 -2.7 -1.4 -1.2 -0.1 0.9 1.3 -1.9 -1.1 -0.8 1.2- Publishing & communications services 8.4 5.1 0.7 0.7 3.3 1.0 3.0 -0.4 0.6 1.6 -0.6 0.2 1.8 0.0- Financial & insurance services 14.7 6.8 2.9 -0.5 3.9 -0.8 2.8 2.3 -2.6 3.1 0.5 2.7 -0.5 1.9- Real estate & renting 5.3 -7.6 -0.5 -0.6 0.9 -2.9 -4.3 -4.0 2.3 -1.3 1.6 -0.9 -6.7 5.3- Pro essional, scienti ic & technical services 5.6 0.5 -3.7 2.7 1.1 4.1 4.0 -0.6 0.8 0.4 -0.7 1.3 -5.4 5.5- Business services 3.3 5.2 1.2 1.2 0.5 0.3 3.5 2.9 1.2 -1.7 -0.2 1.1 0.7 2.2- Educational services 10.9 2.2 0.5 -1.0 1.1 1.0 0.9 0.6 -1.4 0.0 0.9 3.3 -2.7 1.4- Healthcare & social wel are services 7.5 6.4 3.0 0.9 1.4 1.5 5.8 1.4 2.5 1.0 0.2 0.1 -0.4 1.7

- Entertainment, cultural & sports services 2.9 2.7 0.4 3.0 -1.0 1.4 2.8 0.9 2.7 -1.5 -3.0 -5.2 -2.3 6.0- Membership organizations 3.6 1.6 0.4 0.0 -0.2 -1.2 -1.4 -0.8 -0.4 1.9 -0.6 1.0 0.5 2.7- Sewerage & waste management 0.6 3.3 -3.2 8.6 0.8 2.9 -0.3 -7.3 5.8 0.3 -4.8 -7.9 6.4 -7.41. PreliminarySource: Statistics Korea


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28/83

27 The Green Book |

Te number o workers on payroll in February increased by 201,000 rom a yearearlier to 23,980,000 and the employment rate ell 0.3 percentage points rom theprevious year to 57.2 percent.

Employment growth plunged as the Lunar New Year holiday ell on the same week as the February employment survey (Feb 10-16).

Growth in the number o workers in the manu acturing sector slowed down, whileconstruction workers declined by a larger margin.

By status o workers, the number o regular workers continued to show stronggrowth, while the decline in the number o temporary and daily workers accelerateddue to the Lunar New Year holiday.

2010 2011 2012 2013Annual AnnualQ2 Q3 Q4 Annual Feb Q1 Q2 Q3 Q4 Jan Feb

Number o employed (million) 23.83 24.24 24.57 24.48 24.46 24.68 23.78 23.93 25.00 24.99 24.80 24.05 23.98

Employment rate (%) 58.7 59.1 59.9 59.5 59.4 59.4 57.5 57.8 60.2 60.0 59.4 57.4 57.2

(Seasonally adjusted) 58.7 59.1 59.1 59.1 59.2 59.4 59.4 59.3 59.4 59.5 59.3 59.2 59.1

Employment growth (y-o-y, thousand) 323 415 402 363 474 437 447 467 430 506 342 322 201

(Excluding agriculture, orestry & isheries) 405 440 399 414 497 451 484 498 454 504 344 337 216

- Manu acturing 191 63 112 -12 -75 14 -88 -102 -66 85 140 156 79

- Construction 33 -2 -41 -35 71 22 77 79 33 17 -40 -48 -95- Services 200 386 331 472 514 416 516 541 491 397 236 220 222

- Agriculture, orestry & isheries -82 -25 3 -51 -23 -14 -37 -31 -24 2 -2 -15 -15

- Wage workers 517 427 421 392 374 315 369 360 281 317 303 397 267

Regular workers 697 575 621 572 500 436 417 413 379 485 469 523 529

Temporary workers -34 -78 -137 -76 -10 -2 95 110 73 -79 -109 -77 -151

Daily workers -146 -70 -63 -104 -115 -120 -143 -163 -171 -89 -57 -49 -110

- Non-wage workers -194 -11 -19 -29 100 121 77 108 150 189 39 -75 -66

Self-employed workers -118 1 -39 34 125 124 133 149 173 143 33 -21 -15- Male 181 238 221 208 257 234 244 238 242 284 172 173 47

- Female 142 177 181 155 216 203 203 230 188 223 170 149 154

- 15 to 29 -43 -35 -74 -1 -18 -36 -1 1 -8 -57 -80 -82 -141

- 30 to 39 -4 -47 -13 -83 -56 -31 -53 -65 -80 33 -10 -26 -17

- 40 to 49 29 57 59 46 47 11 32 28 8 12 -3 48 13

- 50 to 59 294 291 294 270 315 270 308 326 260 273 220 200 176

- 60 or more 47 149 137 131 185 222 160 178 251 245 215 182 170

Source: Statistics Korea

8.Employment


29/83

28 | The Green Book

Number o persons employed and employment growthSource: Statistics Korea (employment trend)

Share o persons employed by industrySource: Statistics Korea (employment trend)

Share o persons employed by status o workersSource: Statistics Korea (employment trend)

1,200

1,000

800

600

400

200

0

-200

-400

25

24

23

22

21

(thousand) (million)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

Number of employed (seasonally adjusted, right)Employment growth (y-o-y, left)

100

80

60

40

20

0

(%)

2011. 1 2 3 4 5 6 7 8 9 10 11 12 2 23 4 5 6 7 8 9 10 11 122012. 1 2013. 1

Services Construction Manufacturing Agriculture, forestry & sheries

69.0

7.2

16.9

6.5

70.4

7.2

17.1

4.9

70.9

6.9

17.4

4.3

70.9

6.9

17.4

4.3

68.7

7.3

16.7

6.9

69.0

7.1

16.6

6.8

69.2

7.1

16.5

6.8

69.3

7.1

16.4

6.8

69.1

7.2

16.3

7.0

69.2

7.2

16.2

7.0

69.7

7.2

16.3

6.5

70.3

7.2

16.6

5.6

70.8

7.1

17.1

4.7

71.0

7.2

17.0

4.4

70.2

7.6

16.9

5.0

69.2

7.5

16.5

6.5

68.7

7.4

16.4

7.1

69.1

7.1

16.5

7.0

68.9

7.3

16.5

7.0

69.1

7.1

16.6

6.9

68.4

7.3

16.7

7.2

68.4

7.2

16.8

7.2

68.8

7.1

16.9

6.8

69.2

7.0

17.3

6.1

69.9

7.0

17.8

4.9

70.3

7.0

17.9

4.4

100

80

60

40

20

0

(%)

2011. 1 2 3 4 5 6 7 8 9 10 11 12 2 23 4 5 6 7 8 9 10 12112012. 1 2013. 1

Unpaid family workers Self-employed workers Daily workers Temporary workers Regular workers

46.2

20.0

6.6

22.7

4.5

47.3

19.7

6.0

22.8

4.2

46.9

19.9

6.2

22.7

4.2

45.2

19.9

6.8

22.9

5.2

45.1

19.8

6.7

23.1

5.3

45.2

19.8

6.4

23.2

5.4

45.1

19.9

6.4

23.3

5.3

44.4

20.2

6.7

23.4

5.3

44.4

20.3

6.7

23.2

5.4

44.0

20.5

6.8

23.3

5.4

44.3

20.6

6.6

23.4

5.1

44.9

20.6

6.3

23.4

4.8

45.4

20.5

6.5

23.1

4.5

45.4

20.5

6.5

23.1

4.5

44.9

20.7

7.0

22.9

4.6

44.1

20.5

7.2

23.0

5.2

43.8

20.6

7.0

23.2

5.4

44.3

20.8

6.4

23.4

5.1

43.7

20.5

7.2

23.2

5.3

43.5

20.9

7.4

23.0

5.3

43.3

20.7

7.6

22.9

5.5

43.4

20.5

7.5

23.0

5.6

43.7

20.3

7.5

23.2

5.4

44.2

20.1

7.3

23.3

5.1

44.5

20.5

7.2

23.0

4.8

44.4

20.9

7.2

22.8

4.7


30/83

29 The Green Book |

Te number o unemployed persons in February decreased by 53,000 year-on-year to 990,000, while the unemployment rate ell 0.2 percentage points rom theprevious year to 4.0 percent.

Te month-on-month unemployment rate(seasonally adjusted)rose 0.3 percentage

points, but this was mostly due to seasonal actors such as school vacation, jobsearching and bids or government job projects, which tend to push up theunemployment rate in February.

2010 2011 2012 2013Annual Annual Q2 Q3 Q4 Annual Feb Q1 Q2 Q3 Q4 Jan Feb

Number o persons unemployed (thousand) 920 855 865 786 740 820 1,042 947 841 770 722 847 990Unemployment growth (y-o-y, thousand) 31 -65 -3 -88 -68 -35 -52 -82 -23 -16 -18 -6 -53- Male -7 -48 -32 -48 -41 -26 -49 -54 -19 -16 -13 8 13- Female 38 -17 29 -40 -27 -9 -3 -28 -4 0 -6 -13 -65

Unemployment rate (%) 3.7 3.4 3.4 3.1 2.9 3.2 4.2 3.8 3.3 3.0 2.8 3.4 4.0(Seasonally adjusted) 3.7 3.4 3.4 3.2 3.1 3.2 3.7 3.5 3.3 3.1 3.0 3.2 3.5- 15 to 29 8.0 7.6 7.9 6.7 7.1 7.5 8.3 8.2 8.1 6.8 7.0 7.5 9.1- 30 to 39 3.5 3.4 3.5 3.2 2.9 3.0 3.4 3.2 3.2 2.8 2.7 3.3 3.5- 40 to 49 2.5 2.1 2.1 2.0 1.9 2.0 2.6 2.4 2.0 2.0 1.8 2.0 2.1- 50 to 59 2.5 2.1 2.0 2.1 1.8 2.1 2.5 2.3 2.0 2.2 1.8 2.2 2.6- 60 or more 2.8 2.6 2.3 2.1 1.8 2.4 6.7 4.4 2.0 1.9 1.6 3.3 4.6


Te economically inactive population in February was up 409,000 rom a yearearlier to 16,950,000, while the labor orce participation rate decreased 0.4percentage points to 59.6 percent. Te number o those economically inactive due to housework (up 177,000), old age(up 159,000)and education(up 117,000)increased while those due to rest(down66,000)decreased.

2010 2011 2012 2013

Annual AnnualQ2 Q3 Q4 Annual Feb Q1 Q2 Q3 Q4 Jan FebEconomically inactive population (million) 15.84 15.95 15.56 15.85 16.01 16.08 16.54 16.50 15.67 15.90 16.26 16.98 16.95Labor orce participation rate (%) 61.0 61.1 62.0 61.5 61.1 61.3 60.0 60.1 62.3 61.8 61.1 59.5 59.6(seasonally adjusted) 61.0 61.1 61.2 61.0 61.1 61.3 61.6 61.4 61.4 61.4 61.1 61.1 61.2Growth in economically inactive population(y-o-y, thousand) 143 112 66 191 53 128 96 103 110 57 244 239 409

- Childcare -125 -5 -16 17 23 -2 -9 - 4 -7 -3 -9 -7- Housework 201 101 27 143 103 123 83 85 181 101 126 134 177- Education 12 -51 -39 -78 -69 -12 5 -28 -64 5 39 103 117- Old age 80 -45 -58 -22 2 148 90 76 174 156 186 175 159

- Rest -56 182 163 193 131 -53 107 126 -71 -142 -125 -184 -66Source: Statistics Korea


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30 | The Green Book

Employment rateSource: Statistics Korea (employment trend)

Unemployment rateSource: Statistics Korea (employment trend)

Labor orce participation rateSource: Statistics Korea (employment trend)

64

63

62

61

60

59

58

57

56

55

(%)

2001. 1

Original rate Seasonally adjusted rate

2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

6

5

4

3

2

(%)

2001. 1


2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

65

64

63

62

61

60

59

58

57

(%)

2001. 1


2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


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31 The Green Book |

9.Financial markets

9.1 Stock market

Te Korean stock price index in March ell 1.1 percent to 2,005 points rom theprevious months 2,026 points.

Te KOSPI Composite ell until mid-March due to North Korea-related risks anduncertainties over the bailout o Cyprus, but the KOSPI somewhat recovered laterin the month as the Dow Jones hit record highs and expectations rose over the new governments stimulus measures.

Foreign investors became net sellers o Korean stocks in March, selling 2.1 trillionwon worth o stocks compared to buying 1.9 trillion won in the previous month.

9.2 Exchange rate

Te won/dollar exchange rate in March rose 28.1 won to 1,111.1 won rom 1,083.0won at the end o February.

Te won/dollar exchange rate gradually inched up as the bailout o Cyprus andpolitical unrest in Italy put eurozone concerns back into the spotlight, and also asNorth Korea posed geopolitical risks.

(End-period)

KOSPI KOSDAQFeb 2013 Mar 2013 Change1 Feb 2013 Mar 2013 Change1

Stock price index (points) 2,026.5 2,004.9 -21.6 (-1.1%) 535.9 555.0 19.1 (3.6%)Market capitalization (trillion won) 1,173.2 1,161.7 -11.5 (-1.0%) 119.1 124.0 4.9 (4.1%)Average daily trade value (trillion won) 3.7 3.8 0.1 (2.7%) 1.9 2.2 0.3 (15.8%)Foreign stock ownership (%) 35.0 34.6 -0.4 (-1.1%) 8.5 8.8 0.3 (3.5%)1. Change from the end of the previous monthSource: Korea Exchange

Stock prices

2,200

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

(monthly average, KOSPI Jan 4, 1980=100, KOSDAQ Jul 1, 1996=1,000)

2001. 1KOSPI KOSDAQ2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


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32 | The Green Book

(End-period)2008 2009 2010 2011 2012 2013

Dec Dec Dec Dec Dec Feb Mar Change1

Won/dollar 1,259.5 1,164.5 1,134.8 1,151.8 1,070.6 1,083.0 1,111.1 -3.6

Won/100 yen 1,396.8 1,264.5 1,393.6 1,481.2 1,238.3 1,172.0 1,181.5 4.8

1. Appreciation from the end of the previous year (%); the exchange rate is based on the closing price at 3:00 p.m., local time.

Foreign exchange rate

Daily oreign exchange rate trend

1,800

1,600

1,400

1,200

1,000

800

600

(month-end, )

2001. 1

Won/dollar Won/100 yen

2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

1,800

1,600

1,400

1,200

1,000

800

600

( )

2008. 1. 2

Won/dollar Won/100 yen

2008. 8. 11 2009. 3. 18 2009. 10. 19 2010. 5. 25 2010. 12. 27 2011. 8. 3 2012. 3. 9 2012. 10. 16

Te won/100 yen exchange rate rose 9.5 won in March. Amid a strong won trend,the weakening o the yen was diluted due to a pre erence or sa e assets resultingrom concerns over the eurozone.


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33 The Green Book |

9.3 Bond market

3-year reasury bond yields ell 11 basis points in March to 2.52 percent rom theprevious months 2.63. Yields ell as external uncertainties resulted in a growingappetite or sa e assets, and also as the government lowered its growth orecast orthe Korean economy to 2.3 percent rom 3.0 percent.

9.4 Money supply & money market

M2(monthly average)in January expanded 4.8 percent rom a year earlier.

Although the money supply in the oreign sector declined due to the out ow o oreign investors securities investment capital, M2 growth accelerated as themoney supply in the government sector expanded resulting rom an increase inscal spending at the beginning o the year.

(End-period, %)

2007 2008 2009 2010 2011 2012 2013

Dec Dec Dec Dec Dec Dec Feb Mar Change1

Call rate (1 day) 5.02 3.02 2.01 2.51 3.29 2.77 2.76 2.75 -1

CD (91 days) 5.82 3.93 2.88 2.80 3.55 2.89 2.82 2.81 -1

Treasury bonds (3 yrs) 5.74 3.41 4.44 3.38 3.34 2.82 2.63 2.52 -11

Corporate bonds (3 yrs) 6.77 7.72 5.56 4.27 4.21 3.29 2.99 2.88 -11

Treasury bonds (5 yrs) 5.78 3.77 4.98 4.08 3.46 2.97 2.74 2.58 -16

1. Basis point, changes from the previous month

Interest ratesSource: The Bank o Korea

10

9

8

7

6

5

4

3

2

1

(monthly average, yearly, %)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Overnight call rate (daily)3-yr corporate bonds yield 3-yr treasury bonds yield

2010. 1 2011. 1 2012. 1 2013. 1


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34 | The Green Book

Total money supplySource: The Bank o Korea

40

30

20

10

0

-10

-20

(y-o-y, monthly average balance, %)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Lf Reserve money M1

2010. 1 2011. 1 2012. 1 2013. 1

Bank deposit growth turned positive in February while the growth o assetmanagement company (AMC) deposits slowed.

Bank deposit growth turned positive(-7.6 trillion won [ 7.7 trillion won)as instantaccess deposits soared due to Lunar New Year holiday bonuses and income taxre unds.

Te growth o AMC deposits slowed substantially (15.4 trillion won [ 0.9 trillionwon), led by diminishing seasonal actors such as the re-in ow o corporate undsrom money market unds (MMF).

(Monthly change, end-period, trillion won)

2009 2010 2011 2012 2013Annual Annual Annual Feb Annual Feb Jan Feb Feb1

Bank deposits 54.8 36.9 58.9 14.3 37.0 8.8 -2.4 4.4 1,137.8AMC deposits -27.6 -16.7 -16.6 -8.5 18.8 -4.7 15.4 0.9 333.5

1. Balance at end February 2013, trillion won

(Percentage change from same period in previous year, average)

2008 2009 2010 2011 2012 2013

Annual Annual Annual Annual Annual Q1 Q2 Q3 Q4 Nov Dec Jan Jan1

M12 -1.8 16.3 11.8 6.6 3.8 1.8 3.6 4.3 5.5 5.3 5.8 5.8 454.4

M2 14.3 10.3 8.7 4.2 5.2 5.3 5.6 5.6 4.5 4.4 4.5 4.8 1,831.8

L 3 11.9 7.9 8.2 5.3 7.8 7.5 8.5 7.9 7.1 7.1 7.34 7.74 2,446.34

1. Balance at end January 2013, trillion won2. M1 excluding corporate MMFs and individual MMFs while including CMAs3. Liquidity aggregates of financial institutions (mostly identical with M3)4. Preliminary


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35 The Green Book |

Deposits in nancial institutionsSource: The Bank o Korea

30

20

10

0

-10

-20

(y-o-y, end of monthly balance, trillion won)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

Koreas current account(preliminary) in February posted a surplus o US$2.71billion, staying in the black or 13 consecutive months.

Te goods account surplus inched down rom US$2.62 billion in January toUS$2.56 billion in February. Tere were ewer working days in February due to theLunar New Year holiday, leading to a decrease in both exports and imports.

Goods exports (US$ billion)47.16 (Jan 2013)[ 42.22 (Feb)

Goods imports (US$ billion)44.55 (Jan 2013)[ 39.66 (Feb)

For the rst two months o the year, exports o I products such as mobile phonesand exports to China improved while vessel exports and exports to the EUcontinued to drop.

Export growth by item (y-o-y, %)11.7 (mobile phones), 5.0 (semiconductors), 1.6 (automobiles), -32.9 (vessels)

Export growth by region (y-o-y, %)7.5 (China), 2.4 (US), -1.2 (Southeast Asia), -5.4 (Japan), -9.8 (EU)

10.Balance o payments


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36 | The Green Book

(US$ billion)

2012 2013

Annual Q1 Feb Jan-Feb Q2 Q3 Q4 Jan Feb1 Jan-Feb1

Current account 43.14 2.56 0.56 -0.41 11.19 14.56 14.94 2.33 2.71 5.04

- Goods balance 38.34 2.61 1.31 -0.31 8.52 13.34 13.98 2.62 2.56 5.18

- Service balance 2.68 -0.65 -1.22 -1.35 2.31 0.65 0.36 -0.93 -0.46 -1.39- Primary income balance 4.89 1.49 0.61 1.80 0.82 1.04 1.54 0.97 0.63 1.60

- Secondary income balance -2.76 -0.89 -0.15 -0.56 -0.47 -0.47 -0.93 -0.33 -0.02 -0.35

1. PreliminarySource: The Bank of Korea

Te capital and nancial account (preliminary) in February posted a net out ow o US$3.27 billion.

Capital & fnancial account balance (US$ billion)-1.38 (Q1 2012)[ 7.97 (Q2)[ -13.34 (Q3)[ -20.96 (Q4), -0.91 (Jan 2013)[ -3.27 (Feb)

Net out ow in direct investment contracted to US$0.78 billion rom the previousmonths US$1.42 billion due to a decrease in overseas direct investment.

Te port olio investment account switched to a net in ow o US$1.99 billion roma net out ow o US$4.37 billion as oreign investors equity investment turned toa net in ow and also due to expansion o oreign investors bond investment.

Te net in ow o nancial derivatives expanded slightly to US$0.69 billion romUS$0.59 billion in the previous month, while the other investment accountswitched to a net out ow o US$3.22 billion rom a net in ow o US$4.64 billionas banks oreign borrowings switched to a net redemption.

he current account in March is expected to maintain a surplus, helped by agoods account surplus resulting rom a trade surplus in March.

Despite a deteriorating intellectual property account, the service account narrowedthe de cit rom US$0.93 billion in the previous month to US$0.46 billion inFebruary, helped by improving business service and travel accounts.

Te primary income account surplus narrowed to US$0.63 billion rom US$0.97billion due to a decrease in interest income. Te secondary income de cit narrowedto US$0.02 billion rom US$0.33 billion in the previous month.


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37 The Green Book |

Travel account balanceSource: The Bank o Korea (balance o payments trend)

4

3

2

1

-1

-2

-3

(US$ billion)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Travel paymentTravel revenue

2010. 1 2011. 1 2012. 1 2013. 1

Travel balance

Current account balanceSource: The Bank o Korea (balance o payments trend)

8

6

4

2

0

-2

-4

-6

(US$ billion)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Current account

2010. 1 2011. 1 2012. 1 2013. 1

Goods account Service account

Capital & nancial account balanceSource: The Bank o Korea (balance o payments trend)

15

10

5

0

-5

-10

-15

(US$ billion)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1Capital & nancial account

2010. 1 2011. 1 2012. 1 2013. 1Portfolio investment Direct investment Financial derivatives


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38 | The Green Book

(%)

2012 2013Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Month-on-Month 0.4 -0.1 0.0 0.2 -0.1 -0.2 0.4 0.7 -0.1 -0.4 0.2 0.60.3 -0.2

Year-on-Year 3.1 2.6 2.5 2.5 2.2 1.5 1.2 2.0 2.1 1.6 1.4 1.51.4 1.3Consumer prices excluding oil and agriculturalproducts (y-o-y) 2.5 1.9 1.8 1.6 1.5 1.2 1.3 1.4 1.5 1.3 1.2 1.21.3 1.5

Consumer prices excluding ood and energy (y-o-y) 2.6 1.7 1.6 1.5 1.4 1.2 1.2 1.4 1.4 1.4 1.4 1.41.2 1.4Consumer prices or basic necessities (y-o-y) 2.8 2.0 2.0 2.2 1.8 0.8 0.6 1.7 1.6 1.0 0.7 0.80.8 0.8


PricesSource: Statistics Korea (consumer price trend) & The Bank o Korea (producer prices)

16

13

10

7

4

1

-2

-5

(y-o-y, %)

2001. 1Consumer price in ation Producer price in ationCore in ation2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

11.1 Prices

Consumer prices in March rose 1.3 percent year-on-year, staying stable at the 1.0percent range or ve consecutive months. On a year-on-year basis, prices ell 0.2percent month-on-month,

Core consumer prices, which exclude oil and agricultural products, rose 1.5 percentyear-on-year but ell 0.2 percent month-on-month. Core consumer prices basedon the OECD method, which exclude ood and energy, rose 1.4 percent year-on-year but ell 0.4 percent month-on-month. Consumer prices or basic necessities,a barometer o perceived consumer prices, were up 0.8 percent year-on-year anddown 0.4 percent month-on-month.

Te average annual expected in ation remained unchanged rom the previousmonth and the import prices declined 8.6 percent year-on-year.

Expected in ation (%)3.7 (Jul 2012)[ 3.5 (Aug)[ 3.3 (Sep)[ 3.3 (Oct)[ 3.2 (Nov)[ 3.1 (Dec)[ 3.2 (Jan 2013)[ 3.2 (Feb)[ 3.2 (Mar)

Import price increases (y-o-y, %, won base)0.5 (Aug 2012)[ -2.2 (Sep)[ -6.4 (Oct)[ -7.9 (Nov)[ -9.0 (Dec)[ -10.6 (Jan 2013)[ -8.6 (Feb)

11.Prices andinternationalcommodityprices


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41 The Green Book |

Domestic oil product prices rose early in the month, hitting a yearly high o 1,994.1won on March 6, then slid later in the month. Domestic gasoline prices ell orthree consecutive weeks since the rst week o March.

Gasoline prices (won/liter)

1,993.8 (1st

week Mar)[ 1,992.4 (2nd

week)[ 1,985.5 (3rd

week)[ 1,978.2 (4th

week)

(US$/barrel, period average)

2010 2011 2012 2013

Annual Annual Annual Sep Oct Nov Dec Jan Feb Mar

Dubai crude 78.1 105.9 109.0 111.2 109.0 107.3 106.4 107.9 111.1 105.6

Brent crude 79.7 111.0 111.7 113.0 111.6 109.3 109.2 112.7 116.2 109.0WTI crude 79.5 95.1 93.8 94.5 89.5 86.6 88.2 94.8 95.3 92.9

Source: Korea National Oil Corporation

(US$/barrel, period average)

2010 2011 2012 2013


Gasoline prices 1,710.4 1,929.3 1,985.8 2,024.5 2,005.7 1,956.0 1,935.6 1,924.6 1,952.5 1,986.5

Diesel prices 1,502.8 1,745.7 1,806.3 1,836.7 1,820.8 1,777.7 1,760.0 1,749.6 1,766.7 1,786.0

Source: Korea National Oil Corporation

Dubai crude prices and import pricesSource: Korea National Oil Corporation

160

140

120

100

80

60

40

20

160

140

120

100

80

60

40

20

(thousand won/B) ($/B)

2004. 1

Dubai crude (import prices, won, left) Dubai international prices (dollar, right)

2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 12012. 1 2013. 1


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42 | The Green Book

International grain prices declined as US inventories exceeded expectations, whilenon errous metal prices continued to all.

Te prices o wheat and corn increased or most o March but decreasedsubstantially at the end o the month due to the supply orecast* and better than

expected US inventories. Soybean prices, which had been weakening all month,also plunged at month-end.

* Te US Department o Agriculture (USDA) upgraded its 2012-13 world grain productionorecast by 0.1 percent in its March report.

US grain inventories (March 1st, billion bushel)Corn (5.40) (market expectation: 5.00), soybean (1.00) (market expectation: 0.95), wheat (1.23)(market expectation: 1.17)

Despite an improvement in Chinas PMI(50.4 in Feb [ 51.7 in Mar), non errousmetal prices continued to all due to the Cyprus crisis and reappearing concernsover the eurozone scal crisis.

Prices o non errous metals in March (m-o-m, %)Zinc (-8.8), lead (-7.8), aluminum (-6.8), nickel (-5.6), copper (-5.1)

(Period average)

2010 2011 2012 2013


2,553 3,062 3,006 3,172 3,110 3,067 3,037 2,996 2,990 2,947* A weighted average index of 17 major commoditiesSource: KOREA PDS

International commodity pricesSource: Bloomberg (CRB), The Bank o Korea (Reuters index)* CRB demonstrates a utures price index o 21 commodities listed on the US Commodity Transaction Market, including beans and other

crops, crude oil and jewelry.

470

430

390

350

310

270

230

190

150

4,000

3,000

2,000

1,000

01997. 1 1998. 1 1999. 1

CRB (left) Reuters index (right)

2005. 12004. 12003. 12002. 12001. 12000. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 12012. 1 2013. 1


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43 The Green Book |

12.1 Housing market

Nationwide apartment sales prices continued a downward trend in March, alling0.1 percent rom the previous month.

Apartment sales prices in the Seoul metropolitan area(down 0.3%, m-o-m) declined by a smaller margin than the previous month(down 0.4%, m-o-m).

Apartment sales price growth accelerated in areas excluding the Seoul metropolitanarea, in particular Daegu(up 0.3%, m-o-m), North Gyeongsang Province(up 0.7%,m-o-m) and Sejong(up 1.3%, m-o-m). Apartment prices in the ve metropolitancities remained unchanged and other cities rose 0.1 percent.


2012 2013

May Jun Jul Aug Sep Oct Nov DecJan-Mar Jan Feb Mar Mar 41 Mar 111 Mar 181 Mar 251

Nationwide -0.1 -0.3 -0.4 -0.4 -0.3 -0.3 -0.2 -0.3 -0.7 -0.3 -0.2 -0.1 -0.03 -0.01 -0.01 0.01

Seoul -0.5 -0.8 -0.7 -0.9 -0.7 -0.6 -0.5 -0.6 -1.1 -0.6 -0.4 -0.1 0.01 0.00 -0.04 -0.03

Gangnam2 -0.6 -1.0 -0.9 -1.3 -0.9 -0.7 -0.4 -0.7 -1.0 -0.8 -0.3 0.0 0.07 0.05 0.03 0.01

Gangbuk 3 -0.5 -0.6 -0.5 -0.5 -0.4 -0.5 -0.6 -0.5 -1.2 -0.5 -0.5 -0.3 -0.06 -0.06 -0.13 -0.08

Seoul metropolitan area -0.4 -0.6 -0.6 -0.8 -0.7 -0.6 -0.5 -0.6 -1.3 -0.7 -0.4 -0.3 -0.05 -0.05 -0.07 -0.04

5 metropolitan cities 0.1 -0.1 -0.2 -0.3 -0.1 0.0 0.1 0.1 0.0 0.1 0.0 0.0 0.02 0.03 0.07 0.08

1. Weekly trends2. Upscale area of Southern Seoul3. Northern SeoulSource: Korea Appraisal Board (since Jan 2013)

12.Real estatemarket

Apartment sales prices by regionSource: Kookmin Bank

4

3

2

1

0

-1

-2

(m-o-m, %)

2009. 1 7 7 7 7

Nationwide Metropolitan citiesSeoul metropolitan area

2010. 1 2011. 1 2012. 1 2013. 1


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45 The Green Book |

(Monthly average, thousand)

2009 2010 2011 2012 2013Annual Annual Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Nationwide 53 48 55 77 18 39 47 45 46 37 38 31 26 45 50 81 17 34

Source: Ministry of Land, Infrastructure and Transport

12.2 Land market

Nationwide land prices in February rose 0.07 percent month-on-month, but werestill 0.01 percent lower than the pre-crisis peak reached in October 2008.

Land price growth in the Seoul metropolitan area(up 0.05%, m-o-m)turnedpositive, with prices in Seoul(up 0.06%, m-o-m)showing signi cant growth.

Land price increases in Seoul metropolitan area (m-o-m, %)0.10 (Jun 2012)[ 0.03 (Jul)[ -0.01 (Aug)[ -0.02 (Sep)[ 0.03 (Oct)[ 0.04 (Nov)[ 0.06(Dec)[ -0.01 (Jan 2013)[ 0.05 (Feb)

Land prices continued to rise in areas excluding the Seoul metropolitan area(up0.11%, m-o-m), with Sejong(up 0.63%, m-o-m)posting the highest growth rate inthe nation or the 12th straight month in February.

Land price increases in areas excluding Seoul metropolitan area (m-o-m, %)0.13 (Jun 2012)[ 0.13 (Jul)[ 0.11 (Aug)[ 0.10 (Sep)[ 0.11 (Oct)[ 0.12 (Nov)[ 0.12(Dec)[ 0.11 (Jan 2013)[ 0.11 (Feb)

Monthly transaction volumeSource: Ministry o Land, In rastructure and Transport

140

120

100

80

60

40

20

0

(thousand)

2006. 1 2007. 1 2008. 1 2009. 17 7 7 77 77

Nationwide Areas excluding the Seoul Metropolitan areaSeoul metropolitan area

2010. 1 2011. 1 2012. 1 2013. 1


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46 | The Green Book

Nationwide land transactions in February were 142,000 land lots, up 0.6 percentrom the previous month but down 14.4 percent rom 165,000 a year earlier.

Monthly land transactions increased in Seoul(up 1.1%, m-o-m), Gwangju(up

42.9%, m-o-m), Daejeon(up 33.1%, m-o-m), and Daegu(up 22.9%, m-o-m).

ransactions o vacant land decreased 14.1 percent month-on-month to 65,000lots, making up 45.6 percent o the total amount o transactions, and were down17.8 percent rom 79,000 a year earlier.

Land prices by regionSource: Korea Land & Housing Corporation (land price trend)

15

12

9

6

3

0

-3

-6

-9

-12

-15

-18

(%)

1994

Metropolitan area City County

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20122011

National average


2008 2009 2010 2011 2012 2013

Annual Annual Annual AnnualQ1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 Jan-Feb Jan Feb

Nationwide -0.31 0.96 1.05 1.17 0.29 0.30 0.29 0.29 0.87 0.30 0.33 0.12 0.21 0.10 0.03 0.07

Seoul -1.00 1.40 0.53 0.97 0.40 0.28 0.17 0.12 0.33 0.17 0.26 -0.14 0.09 0.00 -0.06 0.06

Gyeonggi -0.26 1.22 1.49 1.47 0.26 0.38 0.43 0.39 0.97 0.34 0.34 0.17 1.32 0.07 0.04 0.03

Incheon 1.37 1.99 1.43 0.66 0.17 0.18 0.15 0.15 0.36 0.21 0.16 -0.03 0.13 0.09 0.01 0.08

Source: Korea Appraisal Board


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47 The Green Book |

(Land lot, thousand)

2008 2009 2010 2011 2012 2013Annual1 Annual1 Annual1 Annual1 Annual1 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Nationwide 208 203 187 208 170 165 187 182 186 163 167 150 133 172 185 224 141 142Seoul 26 22 16 18 13 12 14 15 15 13 12 10 9 15 16 20 10 10Gyeonggi 45 46 41 43 33 30 37 36 35 32 34 30 27 35 36 45 29 28Incheon 13 10 8 10 8 6 7 7 8 7 7 8 8 10 9 10 5 5

1. Monthly averageSource: Korea Land & Housing Corporation

Land and consumer prices since 1970sSource: Korea Appraisal Board (land prices), Statistics Korea (consumer prices)

Land trade volumeSource: Korea Land & Housing Corporation (land trade trend)

60

50

40

30

20

10

0

-10

-20

(y-o-y, %)

1975

Land price in ation Consumer price in ation

1980 1985 1990 1995 2000 2005 2010 2012

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

(thousand square meter)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Seoul metropolitan area Areas excluding the Seoul metropolitan area

2010. 1 2011. 1 2012. 1 2013. 1


49/83

48 | The Green Book

Industrial output in February increased 1.2 percent month-on-month butdecreased 1.9 percent year-on-year. Output in construction(up 7.0%, m-o-m),public administration(up 3.2%, m-o-m)and services(up 1.7%, m-o-m)rose, whileoutput in mining & manu acturing(down 0.8%, m-o-m)ell.

Te cyclical indicator o the coincident composite index rose 0.1 point in February.

Four components, such as the value o construction completed, service activity,imports and domestic shipment, increased while mining & manu acturingproduction and retail sales decreased.

Components o the coincident composite index in February (m-o-m) value o construction completed (3.0%), service activity (0.6%), imports (1.2%), domesticshipment (0.2%), mining & manu acturing production (-0.2%), retail sales (-0.6%), non armpayroll employment (0.0%)

Te cyclical indicator o the leading composite index ell 0.1 point rom theprevious month.

Five components, including construction orders received, KOSPI and consumerexpectations index, were higher compared to the previous month while the ratioo job openings to job seekers, domestic shipment o machinery and indicator o inventory cycle ell.

Components o the leading composite index in February (m-o-m) value o construction orders received (3.1%), KOSPI (1.3%), consumer expectations index(0.9p), international commodity prices (0.3%), ratio o export to import prices (0.2%), ratioo job openings to job seekers (-3.7%p), domestic shipment o machinery (-2.6%), indicator o inventory cycle (-0.7%p), spreads between long & short term interest rates (0.0%p)

2012 2013

Jul Aug Sep Oct Nov Dec1 Jan1 Feb1

Industrial output (m-o-m, %) 0.7 -1.4 1.1 -0.4 1.1 1.0 -1.0 1.2

(y-o-y, %) 1.5 -0.5 1.0 -1.0 1.4 -0.2 3.1 -1.9

Coincident composite index (m-o-m, %) 0.5 -0.1 0.5 -0.1 0.6 0.5 0.4 0.5Cyclical indicator o coincident composite index 99.8 99.3 99.3 98.9 99.1 99.2 99.2 99.3

(m-o-m, p) 0.1 -0.5 0.0 -0.4 0.2 0.1 0.0 0.1

Leading composite index (m-o-m, %) 0.6 0.1 -0.1 0.3 0.7 0.7 0.2 0.3

Cyclical indicator o leading composite index 100.1 99.8 99.4 99.3 99.6 100.0 99.8 99.7

(m-o-m, p) 0.1 -0.3 -0.4 -0.1 0.3 0.4 -0.2 -0.1

1. Preliminary

13.Compositeindices o business cycleindicators


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49 The Green Book |

Industrial outputSource: Statistics Korea (industrial activity trend)

Cyclical indicator of coincident composite indexSource: Statistics Korea (industrial activity trend)

Cyclical indicator o leading composite indexSource: Statistics Korea (industrial activity trend)

20

15

10

5

0

-5

-10

-15

(%)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1

Industrial output (m-o-m) Industrial output (y-o-y)

2010. 1 2011. 1 2012. 1 2013. 1

110

105

100

95

90

(points)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1

110

105

100

95

90

(points)

2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1


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50 | Policy Issues

Policy IssuesPark Geun-hye Administrations Economic Policy Directions or 2013

Key economic policy directions

Te government economic policies or 2013 are aimed at realizing the national vision o a new era o hope and happiness, by supporting the working class andpromoting a creative economy.

Te government will adopt aggressive macroeconomic policies, improveregulations to be more employment- riendly, and create an environment where acreative economy can ourish.

Te administration will pave the way or securing the livelihoods o low- andmiddle-income amilies through stable in ation and tailored wel are programs,which range rom micro- nancing to housing and education support.

Te government will pursue economic democratization by creating airer andmore transparent markets, and developing a system which protects economically vulnerable groups.

o more efciently manage risks in such volatile domestic and global situations,the 2013 policies incorporate rein orcing crisis response systems and improvingrisk management.

Te government will improve its scal situation in order to success ully implementthe new administrations priorities and set up a policy implementation system by acilitating intra-governmental cooperation.


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51Policy Issues |

Aim Economic recovery and creative economy promotion

Key policies Employment growth Better living conditions Economic democratizationStrengthened risk management

Tasks

Aggressively managingmacroeconomyBoosting both exports anddomestic demandAdopting employment-riendly regulationsProviding an environmentthat creates a creativeeconomy

Stabilizing pricesIncreasing micro- inancingand easing housing andeducation burdensDeveloping tailoredwel are programs

Promoting air competitionRequiring transparentand responsible businessmanagementProtecting theeconomically vulnerable

Rein orcing crisis responsesystemsDealing with sectoral risk actors

Requirement Improving iscal soundness and promoting intra-governmental cooperation

Major policy tasks or 2013

1. Job creation1) Active macro-policy management

Te government will exceed its target to rontload 60 percent o the budget in the rsthal o the year and the working classes will be supported through supplementary spending. In April, the government will work on devising supplementary budgets and changing und management plans in order to support the workingclass, promote economic recovery and preserve revenues. Te governmentwill contribute to a recovery in middle and long-term scal soundness througheconomic revitalization. Investments in public institutions will be expanded by 1trillion won mainly through SOC areas.

Te Bank o Korea will strengthen its Aggregate Credit Ceiling Loan supportor small- and medium-sized enterprises (SMEs) and exporters that are havingdifculties with nancing, and other policy unding programs will be expanded.

* SME policy nancing will be rontloaded by 60% in the rst hal o the year and additionalincreases will be reviewed.

Financial support will be strengthened or the working class, and measures, such ashouse poor support and the National Happiness Fund will be prepared to relievethe household debt burden.

* Support will be expanded (3.5[ 4.0 trillion won) through the Smile Microcredit, the Sunshineloan, the New Hope loan, the Switch-over Dream loans and etc.


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52 | Policy Issues

Te government will respond to any excessive volatility in oreign exchange marketscaused by advanced economies quantitative easing programs. Te government willseek to strengthen international cooperation through various channels, such as theG20, in order to minimize the negative e ects o advanced economies monetary policies on the Korean economy.

2) Fostering domestic demands and exportsGrowth will be boosted by revitalizing investment and consumption. In May,the private and public sectors will jointly prepare or measures to improve theinvestment climate.

* Personnel and location-related regulations will be eased and nancing support will be givenor SMEs to change out used acilities.

In order to revitalize oreign investment, various measures will be prepared inMay, such as employment- riendly incentive re orms, an expansion o immigrantinvestor programs, and an exemption o tax on intra-transaction pro ts o oreign-

invested rms. Working class income will increase through SME worker supportand a reasonable minimum wage.

SME and service industry-centered export support will be strengthened. Exportnancing will be rontloaded by 60 percent during the rst hal , and SMEscapability to ght intellectual property rights disputes will be boosted. In April,measures to support export SMEs that are vulnerable to exchange rate volatility will be prepared. A report on trade barriers or services will be published inSeptember and oreign tourist administrative expediency will be improved. Te rade Investment Promotion Meeting will be held quarterly to conceive o measures to vitalize exports.

Financing support or home buyers will be expanded, tax burdens, such as theacquisition tax and trans er tax, will be relieved, and housing market-relatedregulations will be eased.

3) Improving systems to be more employment- riendly

Te government will push ahead with major projects and policies rom theperspective o job creation. A middle-term Job Roadmap will be prepared toachieve 70 percent employment and results will be monitored through the JobRecovery Meeting. Te evaluation result o major scal projects in terms o jobcreation will be actively utilized in the ormulation and execution o other scal

projects, and an employment- riendly tax system will be drawn up.Jobs will be created through public sector job creation programs and by increasingemployment support or businesses. More jobs will be available in the public sectorthroughout the year, and public institutions recruitment will be expanded rom15,374 to 16,251. Jobs will also be created by promoting connections among localgovernments, universities and businesses. Working conditions will be improvedto be more employment- riendly: Te government will come up with a systemwhich will shorten the working hours or pregnant workers, and childcare- riendly policies will include Fathers Month. Te support system or emale-ownedbusinesses will be re ormed, and bene ts will be made accessible to emale- riendly businesses in addition to companies with emale CEOs. Work hour conditionsor long-hour workers will be improved, through rolling-over hours worked. Te


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53Policy Issues |

Comprehensive Job In ormation Network, which links together public and privatesector job in ormation, will provide a broader range o employment in ormation.

4) Laying the oundations or a creative economy

Te government will promote a positive environment where entrepreneurs are

una raid to start businesses, even though they may ail, and try again in the eventthat they do. Measures to support new businesses and ventures at each stage o thebusiness li e cycle will be prepared in June.

At the business creation stage, the government will encourage increased investmentin new businesses. In order to induce adventurous investment by the privatesector, public institutions, such as the Korea Fund o Fund and the Korea FinanceCorporation, will share more investment risks by launching a pilot program calledthe National Creative Economy Creation Fund. Conditions or the nancing o new businesses will be improved through the introduction o crowd unding programs.

o acilitate withdrawals by early investors, a market will be opened or those whowish to sell their stakes in venture businesses. ax support will be expanded topromote mergers and acquisitions o technological innovation SMEs, and theKONEX market, a capital market or SMEs, will be established.

At the rechallenge stage, nancial burdens rom past ailures will be eased,including burdens owing to joint sureties, and comebacks will be supported. Jointsureties required by nonbanking institutions will be li ed and postponements willbe granted on delinquent taxes or people trying to start another business.

Support or creative service industries will be increased to the same level o supportthat the manu acturing industry receives, which is expected to oster creativeentrepreneurship.

* Creative service industries include lm, computer games, tourism, entertainment, consulting,health insurance, MICE and industries that converge with the a orementioned industries.

Measures to advance the service industry by revitalizing R&D and utilizing Iwill be prepared in May. ax support and budgets or R&D inve

economic bulletin (vol. 35 no. 4)

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