NABO Economic Trends & Issues (Issue No. 56)
June 22, 2017
Economic Policy Analysis Division of the Economic Analysis Office
I. Economic trends
The Korean economy has recently shown modest signs of recovery. Exports and investment continue to increase, though production is less encouraging. Industrial production fell in April MoM due to the stalemates in the semiconductor, automobile, and other manufacturing industries, but exports and capital investment increased powered by the recovery in the global economy.
The economic recovery is steady owing to improvement in business indicators. Consumption generally remains weak, but retail sales in April rebounded from March and the Consumer Sentiment Index (CSI) increased significantly.
Ⅱ. Characteristics and implications of non-regular workers in Korea
The share of non-regular workers in the entire wage workforce in Korea has persistently declined over the last few years but has recently increased. It remains as high as two times the OECD average. Non-regular employment of middle-aged, elderly, and female workers has increased markedly primarily in part-time jobs in the service industry. To strengthen the social safety net and narrow the disparity in income resulting from the bifurcation of the labor market, the government needs to find a way to improve average wage levels and job security for non-regular workers.
Ⅲ. Key characteristics of the housing market and the factors in the housing price fluctuation
Home prices are generally increasing nationwide, and the rise has been particularly sharp in the Seoul metropolitan area. However, downward pressure on the housing price in the mid or the long term is expected to increase because of a reduction in the number of people aged 35-54 who are major home buyers, a sharp increase in household debt, and the possibility of a rise in interest rates. Since overall conditions for housing finance are forecast to deteriorate, proactive countermeasures, such as improvement in risk management, need to be taken.
Ⅳ. Changes in the Consumer Sentiment Index and the outlook for consumption
The CSI had fallen since 2014 but rebounded in 2017 due to the improvement in exports and imports and optimistic market expectations about the new president's administration. Lag correlation coefficients and causality analysis show that the CSI is leads private consumption. Therefore, the recent rise in the CSI bodes well for consumption for the second half of the year. However, such improvement is likely to be limited due to structural factors that have restricted the recovery of private consumption since the 2008 financial crisis.