The below contains announcements on the near-term economic outlook as well as trade, industrial production, producer and consumer prices, private consumption, and consumer confidence. Also covers the rising power of the "386 generation" and government concern regarding the nation's waning global competitiveness in terms of labor productivity.

Economy

GDP

Korea's business sector is expecting a dramatic improvement in the Korean economy during 2005. Released in early March, The Korea Chamber of Commerce and Industry's business survey shows an average BSI (Business Survey Index) of 77 for the first quarter of 2005 and a rapid swing up to 111 for the second quarter.

The survey covers 1,485 companies from industries such as electronics, semiconductor, automotive, shipbuilding, machinery, computing, mining, fishing and agriculture. Electronics, semiconductor, machinery, and steel industries showed even greater optimism, with responses exceeding the 111 average for the second quarter.

Goldman Sachs' assessment of the Korean economy echoes optimistic assessment coming from the domestic businesses. The company expects domestic demand to bounce back from its downtrend sooner and more sharply than previously expected. In early March Goldman Sachs revised its forecast for 2005 GDP upwards to 4.5% growth, compared to 3.7% earlier. 5.3% is expected in 2005, from 4.7% earlier.

Trade

February export growth slipped to 7.2% year-on-year to US$20.5 billion, according to the Ministry of Commerce, Industry and Energy. The increase was the lowest since May 2003 due to the lunar holiday, which fell in February as opposed to January in 2004. Imports grew 4.5% to roughly US$18.3 billion, hitting the slowest growth since August 2003 due to shrinking demand for capital and consumer goods. The trade surplus contracted to US$2.3 billion, from US$3.1 in January.

Exports of wireless communication devices increase 6.8% to approximately US$2.1 billion, as companies shipped their goods near the end of January, just prior to the holiday. Semiconductor exports climbed 16.7% to US$2.3 billion due to Chinese demand. PC exports witnessed a stark decline of 21.6% to US$1.2 billion, however, due to global oversupply as well as the rise of domestic makers in China.

Lower PC sales, along with a fall in automobile and textile shipments, brought total exports to China down 3.1% year-on-year to US$2.4 billion during the first 20 days of February. Full-month figures have not yet been released.

Weaker demand for wireless communication devices, computers, and household electronics caused a 14.1% decrease in exports to the US during the first 20 days of February. US-bound exports totaled over US$1.6 billion.

The ministry expects March exports to improve due to higher demand from major import markets and due to the traditional end-of-quarter effect.

Industrial Production

The National Statistical Office says January 2005 industrial production rose 3.1% month-on-month and 14.2% year-on-year, the highest increase seen in 11 months. The government, however, has given a cautious assessment of the figure, saying that the increase was mainly due to the lower base provided by the lunar new year in January 2004. The ministry also stated that two or three more months would need to pass before knowing whether the economy had indeed gained more upward momentum. A more modest increase of less than 5% has been predicted for the months ahead.

Producer Prices

Despite a sharp rise in produce and raw materials prices, Korean producer prices rose more slowly at 3.2% year-on-year in February, compared to 4.1% in January. The increase was the slowest since prices rose 3.8% in January 2004. The Bank of Korea attributed the slower rise to corporations absorbing higher oil prices, which are being viewed as a temporary phenomenon.

The Bank of Korea's producer-price index measures wholesale prices of 923 goods and services bought and sold by Korean companies. A rise in the index typically results in higher consumer prices.

Consumer Price Index

Oil prices still continued to boost consumer prices. The National Statistical Office announced that February consumer prices rose 3.3% year-on-year and 0.6% from January. The increase is said to have been faster than expected due to oil prices and the lunar new year, which inflates the produce prices that are a key constituent of CPI.

Private Consumption

The Ministry of Finance and Economy announced in mid-March that Korea's domestic consumption is seeing a sharp rebound after a sluggish two years. Credit card settlements, which account for nearly half of private spending, rose 12% year-on-year to US$28.1 trillion won for January and February combined. Credit-card use for consumption-related sectors gained 10% during the same period, reaching 19.2 trillion won.

Consumer Confidence

Korea's consumer confidence index rose to 99.4 in February, a 10-month high and the second consecutive month of increase owing to an improving stock market and stronger economic data. The index had been falling during the second half of 2004, hitting a nadir of 85.1 in December. An index above 100 indicates that a most consumers expect the economy, their personal economic conditions, and their spending plans to improve in six months.

Labor Productivity

The Korea Development Institute in early March highlighted Korea's weakening competitiveness in terms of labor productivity. Although the nation's labor productivity as narrowed the gap with developed countries, productivity still remains only one-third that of the US and Japan.

Korea's labor productivity was 34.8 as of 2000; U.S. labor productivity in the same year stood at a base of 100. Japan's labor productivity was 120.6, and France, Germany and Italy ranged between 74.1 and 96.5.

Meanwhile, developing nations are posing a greater challenge, as labor in these countries is vastly cheaper. The institute noted that Korean wages were 8.3 times higher than in China during 2001, while land prices were four times higher. Corporate taxes were also 1.8 times higher.

Society

Koreans born in the 1960s and 1970s will account for over 30% of the population and comprisethe most influential age group in Korea over the next four decades, said the National Statistical Office in early March. Koreans born during this time span were part of a baby-boom generation, but were followed by sharply lower birth rates.

Even as the nation becomes a "super-aged" society in 2026, when people 65 or older account for more than 20% of the population, this age group will still remain the most influential group through 2040. Koreans born in the 1960, also known as the "386 generation" are believed to be more vocal than other generations, and demonstrate more solidarity. Others point out that economic differences might undermine such solidarity as this group ages, but that they will still hold a relatively cohesive outlook on aged-society related issues.