ECONOMIC OUTLOOK FOR KOREA
26.01.2021, SEOUL,
KGCCI ECONOMIC OUTLOOK
Frank Robaschik
Director / Correspondent Korea
www.gtai.de
© GTAI 2
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© GTAI 4*) data for 1.1.2020-25.1.2021
Source: KDCA, Statistics Korea
Korea successful in fighting Covid-19
South Korea has
well managed the
COVID-19 outbreak
with low infection
rates and low
mortality rates.
The country starts
relatively late with
vaccinations.0
5
10
15
20
25
30
Newly infected in last 14 days per 100.000 inhabitants
0,00
0,00
0,01
0,15
0,24
0,29
2,58
4,59
5,38
7,51
0,00 5,00 10,00
Vietnam
Taiwan
China
Korea
Seoul
Japan
Germany
France
UK
USA
Total Covid-19 cases (in % of population)
*) data for 24.1.2021
Source: WHO, IMF
© GTAI 5
*) data until November 2020
Source: Statistics Korea
Korea – Manufacturing is back
Decline in Korea’s
manufacturing less
severe than than in
1997/98 or 2008/09
crisis.
But it started from
lower capacity
utilization rates.60
65
70
75
80
85
19
95
. 01
19
95
. 12
19
96
. 11
19
97
. 10
19
98
. 09
19
99
. 08
20
00
. 07
20
01
. 06
20
02
. 05
20
03
. 04
20
04
. 03
20
05
. 02
20
06
. 01
20
06
. 12
20
07
. 11
20
08
. 10
20
09
. 09
20
10
. 08
20
11
. 07
20
12
. 06
20
13
. 05
20
14
. 04
20
15
. 03
20
16
. 02
20
17
. 01
20
17
. 12
20
18
. 11
20
19
. 10
20
20
. 09
Capacity utilization in manufacturing (in %)Year *) rate
2013 76,4
2014 76,1
2015 74,5
2016 73,5
2017 73,7
2018 73,9
2019 73,1
2020 71,0
*) data until November
for each year
Source: Statistics Korea
© GTAI 6*) data for 1.1.-20.1.2021
Source: Korea Customs
Korea - Foreign trade is recovering
Exports recovered
from April lows
caused by COVID-19
lockdowns and
shutdowns in major
buyer nations.
So did imports.
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Changes in Foreign Trade (against same period of previous year)
exports imports
© GTAI 7
GDP forecasts by OECD and World Bank
Sources: OECD December 2020; for World, China, US: World Bank January 2021; for Germany 2020: Destatis January 2021; for Korea 2020: BOK
2020 2021 2022
China +2.0 +7.9 +5.2
South Korea -1.0 +2.8 +3.4
United States -3.6 +3.5 +3.3
Germany -5.0 +2.8 +3.3
Japan -5.3 +2.5 +2.3
France -9.1 +6.0 +3.3
United Kingdom -11.3 +4.2 +4.1
World -4.3 +4.0 +3.8
© GTAI 8
Germany’s trade - non-European partners
Source: Destatis
1-11/2020 Exports (Bill. Euro) Change
United States 94.690 -14.1 %
China 86.607 -1.2 %
South Korea 16.290 +2.9 %
Japan 15.851 -18.0 %
Mexico 10.257 -18.9 %
India 9.585 -9.3 %
Canada 8.661 -14,8 %
Australia 7.756 -9.1 %
Brazil 7.705 -18.1 %
Taiwan 7.523 +4.5 %
Korea became the second largest export market for German goods in Asia-Pacific in 2020.
For comparison: German exports worldwide -10.3%
© GTAI 9*) numbers for chemicals excluding pharmaceuticals
Source: KITA, calculations by Germany Trade & Invest
Korea - Imports from Germany in 2020
Korean imports from
Germany rise in
2020 despite the
coronavirus thanks
to sales of more
German cars.
15,4%
3,8%
4,1%
5,0%
5,4%
5,7%
11,1%18,0%
31,4%
Cars, car
parts +7.7%
Machinery
-2.3%
Pharmaceuticals
+6.9%
Electrical products
-4.1%
Electronics
+27.5%
Food, beverages,
tobacco +3.1%
Measuring, controlling
devices -2.9%
Chemicals
-5.3%
Others
+7.6%
Total 20.7 Billion US$, +3.7% against same period of previous year
© GTAI 10
Korean imports 2020
Source: KITA
in Billions US$ Change in %
Total 467.5 -7.1
China 108.9 +1.5
USA 57.9 -7.1
Japan 46.0 -3.3
Germany 20.7 +3.7
Vietnam 20.6 -2.3
Australia 18.7 -9.2
Taiwan 17.8 +13.5
Saudi Arabia 16.0 -26.8
The good data for imports
from Germany and the fall of
commodity prices like oil
made Germany the fourth
largest supplier to Korea in
2020.
© GTAI 11
Korean imports 2020
*) not listed here are major import goods such as metals, steel, electronics and electrical devices
Source: KITA
in Billions US$ Change
Total 467.5 -7.1
coal, oil and gas 86.6 -32.0
machinery 46.1 +15.0
chemicals 42.4 -4.5
food, beverages, tobacco 28.9 +0.6
textiles, clothing, shoes 18.6 -5.0
cars, car parts 18.1 +9.2
measuring equipment 10.2 +8.2
pharmaceuticals 8.6 +11.8
medical devices 4.4 +4.6
Korea paid significantly less
for raw materials in 2020.
Imports of machinery grew
with rising investment,
centered around
semiconductor equipment.
Imports of cars,
pharmaceuticals and medical
devices also rose.
© GTAI 12Source: BOK
GDP by industries in 2020
Manufacturing -1.0 %
slightly growing again in Q4.
Services -1.2%
still depressed because of
contact limitations.-8%
-6%
-4%
-2%
0%
2%
4%
Q1 Q2 Q3 Q4
real change in %
manufacturing services
© GTAI 13
GDP by industries in 2020
Source: BOK, calculations by Germany Trade & Invest
real change in % in the first three quarters of 2020
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
manufacturing
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
services
© GTAI 14
Labour market 2020 - changes
*) December 2020 compared to December 2019
Source: Statistics Korea
-10,0% -5,0% 0,0% 5,0% 10,0%
All ages
15-29
30-39
40-49
50-59
60-64
65-69
over 70
By age group
-15,0% -10,0% -5,0% 0,0% 5,0% 10,0%
Accomodation, Food Service
Wholesale, Retail Trade
Education
Manufacturing
All
Transportation and Storage
Healthcare, Social work
Public Sector
By industry
-12,1%
-7,5%
0,0%
-15,0% -10,0% -5,0% 0,0% 5,0%
Daily
Temporary
Regular
By type of worker
Employment -2.3%
Working hours per
employee -4.4%
© GTAI 15*) real data for GDP, nominal data for trade
Source: BOK; KITA; (p) preliminary, (f) forecast
Economic Development
Korea expected to
surpass pre-crisis GDP
level in 2021.
Exports might reach it,
perhaps also imports.
This is not expected,
however, for
consumption.
2,0 1,7
-7,5
-10,4
-6,0
-1,0
-5,0
6,8
-5,4
-7,1
3,0 3,14,3
6,05,4
-12,0
-10,0
-8,0
-6,0
-4,0
-2,0
0,0
2,0
4,0
6,0
8,0
GDP Privateconsumption
FacilitiesInvestment
Exports Imports
Growth Rates 2019, 2020, 2021
2019 2020 (p) 2021 (f)
© GTAI 16Sources: KITA, KERI
Export outlook for selected products 2021
Export growth expected for all
major product categories.
Above 2019: Semiconductors,
pharmaceuticals, batteries.
Around 2019: Ships.
Close to 2019: Cars, Car parts.
-20-15-10
-505
101520
Change against previous year in %
2020 2021
© GTAI 17Source: KITA
Pharmaceutical industry
2020 steep rise in rapid
antigen test kit exports
Long-term huge
investments in
biotechnology and
contract manufacturing,
e.g. Celltrion, Samsung
Biologics0
2
4
6
8
10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Exports and imports of pharmaceuticals (billions of US$)
exports imports
© GTAI 18
Automobile industry
Sources: MOTIE, KAIDA, KAMA
2019 (in 1.000
units)
2020 (in 1.000
units)
change (in
%)
2021
Production 3,950 3,506 -11.2 3,860
Domestic Demand 1,780 1,886 5.8 1,820
domestic brands 1,518 1,594 5.1
imported brands 265 291 9.8
share of SUVs (in %) 44.6 47.6
hybrid, electric, hydrogen cars 143 227 58.7
Exports 2,400 1,887 -21.4 2,340
German brands increase number of automobiles sold in 2020 by more than a quarter
© GTAI 19Sources: MOTIE
Electricity generation
Focus in future power
plant construction on
solar, offshore wind and
LNG.
Goal of carbon
neutrality for whole
economy by 2050
declared in October
2020.0
5
10
15
20
25
30
35
Solar Wind LNG
Power plant capacity additions 2021 to 2034
© GTAI 20Sources: MOTIE, ICAK
Overseas constructionOrders up by 57% in 2020
Examples (in billions of US$):
Dos Bocas Refinery Mexico 3.6
Panama Metro Line 3 2.8
Al Faw Port, Iraq 2.6
Hawiyah Gas Storage, Saudi 1.85
Residue upgrading, Basrah, Iraq 1.8
T3, Dhaka International Airport 1.65
Refinery Hassi Messaoud, Algeria 1.6
Methanol Plant, Sarawak, Malaysia 1.1
North-South Railway, Philippines 1
Power Plan Fujairah, UAE 1
71,6
22,4
35,1
0
10
20
30
40
50
60
70
80
2005200620072008200920102011201220132014201520162017201820192020
Incoming Orders (billions of US$)
© GTAI 21Source: Statistics Korea
E-Commerce now 1/3 of retail sales
More than 20 per cent of
total retail sales from
mobile shopping.
Rapidly growing in 2020:
Food services and food
But also cars/car parts,
furniture, sports and
leisure appliances,
computers, books.
0%
5%
10%
15%
20%
25%
30%
35%
40%
2017 2018 2019 1-11/2020
Share of E-Commerce in Retail Sales
internet shopping mobile shopping
© GTAI 22
Selected Investment projects/developments• Samsung Electronics strengthening foundry (contract manufacturing) business
• SK Hynix buying memory chips production of Intel
• Hyundai Motor Group focus on alternative propulsion, robotics and mobility services:
new EVs, fuel cells, hydrogen cars / buying Boston Dynamics / unmanned air vehicles
bought St. Petersburg plant of GM in Russia + building car plant in Indonesia
• Samsung Biologics heavily expanding capacities for contract manufacturing
• SK Holdings buying 10 per cent of Plug Power (hydrogen fuel cells and fueling solutions)
• Hanwha Energy JV with Total in US for 1.6 GW solar and energy storage projects
• FTAs: Signing of RCEP in November 2020, Signing of CEPA with Indonesia in December 2020
• LG Energy Solution MOU on battery production in Indonesia, December 2020
© GTAI 23
Outlook for German suppliers in Korea
*) foodstuff excluding pork, import of which from Germany has been prohibited since September 2020.
Market potential 2021
Car parts +
Automobiles +
Pharmaceuticals +
Foodstuff + *)
Chemicals +
Electric equipment =
Machinery =
© GTAI 24
Selected Risks
- Further waves of Coronavirus infections (including mutated forms)
- Tensions between the US and China might lead to the need of separate supply chains
- High indebtedness of Korean private households
- Potential risks to banks, suppliers etc. if some countries or companies will be in financial
trouble
- Rising government debt
- Rising government debt levels and rising central bank assets worldwide
© GTAI 25
For more information
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