The South Korean government expects to see foreign direct investment bump up 70% to US$11 billion in 2004, up from the US$8 billion forecast estimated at the beginning of 2004. The rise up can mainly be attributed to the significant volume of equity acquisition and establishment of alliances involving Korean companies. Primary targets of foreign acquisition and mergers have largely concentrated within the liquid crystal display, semiconductor, and automotive parts industries.

 

However, weakening consumer spending and investment have brought Korea's central bank to prune down its economic forecast for 2004, from 5.2% to 4.7%. The pace of economic growth is expected to drop even more in 2005, expanding only 4%. Waning export growth and construction investment are cited as the main factors. The bank is looking at a 3.6% inflation in 2004, and 3% in 2005

 

Consumer spending in Korea has tailed off in 2004, largely because of the colossal debt Koreans have piled up with credit card purchasing. Consumer expenditure in the country is expected to contract 0.9% in 2004 and grow just 1.8% in 2005.

 

Exports of mobile handsets, semiconductors, electronic devices and automobiles have been important drivers of economic growth in 2004, however, in 2005, exports are projected to increase by only 9.8%, visibly lower than the 21.9% expected for 2004. A stronger KRW against the dollar has also contributed to faltering growth in the export market.

 

The Korean consumer sentiment index, having hovered below 100 for more than two years, dropped to 86.6 in November of 2004, marking the lowest point since December of 2000.