NABO Economic Trends & Issues (Issue No. 61)
I. Economic Trends
Recently, Korean exports have been maintaining a steady increase while domestic demand, except for construction investment, improves. In September, industry production and retail sales rebounded after struggling in the previous month to record a significant increase. The consumer confidence index also rose from the previous month thanks to a relaxation of tensions on the Korean peninsula. However, as the value of construction completed contracted for two months in a row, construction investment is continuing to slow down. Consumer inflation in October is just under 2.0% as it decreased over two consecutive months, and the Korean financial market is showing a depreciation in the won-to-dollar exchange rate while treasury bond interest rates showed a steep increase.
Ⅱ. Changes and Characteristics of Sector-Specific Credit Card Transactions
Regarding the Anti-Graft Act, recent credit card transaction records show signs of different impacts on different sectors, increased consumption on leisure activities, and performance polarization among different distribution conditions. Since the enforcement of the Anti-Graft Act, credit card transactions in entertainment venues and 5-star hotels declined and growth in the flower industry as well as in ordinary restaurants has been sluggish. In 2017, individual credit card expenses on leisure activities such as tourism increased at a relatively high rate. In terms of the type of distribution, credit card revenue significantly increased with spending in consumer cooperatives, convenience stores, while spending in large discount stores or department stores increased at a lower rate than the total average for all sectors.
Ⅲ. Analysis of the Characteristics and Sustainability of the Recent Global Economic Recovery
As private investments in advanced economies including the US have been active mainly in the field of technology in 2017, global economic growth is gradually gaining strength. Moving forward, investment conditions are expected to be favorable for expanding new industries and boosting the financial markets. Also, due to a steady increase in demand for crude oil internationally, global economic growth momentum is expected to be sustained. Stable international demand for crude oil reflects the steady growth of advanced and emerging economies, while also contributing to boosting the global economic growth rate and global trade volume. However, caution should be exercised since factors such as sluggish private consumption due to structural wage increase limitations and the uncertainty of a global interest rate increase may undermine global economic growth.
Ⅳ. Impact of the Chinese Economic Measures against THAAD and Tasks Moving Forward
As tensions with China surrounding the Terminal High Altitude Area Defense (THAAD) platform appear to be subsiding, a study was conducted to examine the impact of China’s economic measures against THAAD on Korean industry. Although a potential revenue decrease of approximately 7.45 trillion Korean won mainly in the tourism and hospitality industries is estimated, the actual damage is expected to be less significant thanks to an increase of non-Chinese inbound tourists as well as impressive levels of exports to China. Other neighboring countries such as Japan and Taiwan have also been subject to China’s economic measures, but they have overcome the risks by reducing their dependency on China through measures such as increasing trade volumes with other Asian countries. Taking this into account, Korea needs to be well-prepared for similar economic measures in the future by helping industries, especially the tourism industry, to reduce their economic reliance on certain markets and by strengthening government support.