NABO Economic Trends & Issues (Issue No. 66)
Ⅰ. Economic Trends
The Korean economy has recently been maintaining a gradual recovery led by consumption and exports, but investments in construction are deteriorating and employment figures have yet to improve. Consumer sales have continued to increase since the previous month and exports continue to flourish thanks to the ongoing global IT boom as well as the increased unit prices of major export items. However, construction investments deteriorated as both the value of construction completed and value of construction orders received dropped, while growth in employment decreased significantly due to the continuously sluggish services industry. Consumer prices increased by a lower rate than the previous month following a decrease in agricultural, livestock and fisheries product prices; and the won-to-dollar ratio declined due to factors such as a reduction of geopolitical risks. Treasury bond interest rates decreased despite the US policy rate hike, because of increased demand for risk-free assets.
II. Analysis of Quality of Life (Well-being) in Korea Compared to International Standards
Various indicators have been used with regard to the increasing interest in “Beyond GDP,” which takes into consideration not only economic development but also social welfare, quality of life and an economy of communion. When comparing and analyzing the World Happiness Report (WHR) between 2005 and 2017 on factors that affect quality of life (the Happiness Index) and degree of contribution, the degree of contribution made by social conditions (such as social support, freedom of choice and awareness of corruption) to the quality of life among OECD countries is 2.8 times higher than the degree of contribution made by economic and environmental factors (such as GDP and life expectancy.) However, the degree of social contribution in Korea (0.92) is sub-par compared to the OECD average (1.68). Therefore, in order to improve the quality of life (the Happiness Index), Korea must focus on development of indicators related to social conditions and make efforts to improve such conditions, particularly in terms of social support.
Ⅲ. Examining China’s Economic Policy Direction and Risk Factors through the 2018 Two Sessions (Liang Hui)
At the 2018 Liang Hui, China set its economic policy direction toward pursuing stable and qualitative growth through economic structural reform. To meet this growth objective, it is expected to reinforce financial risk management while stepping up structural reforms. In this process, factors such as the real estate market, corporate debt and shadow banking have the potential to affect financial institutions and the real economy, emerging as risk factors. Although factors including government policies appear to effectively reduce risk to a certain degree in the real estate market and corporate debt, risks from shadow banking are likely to increase. Since Korean banks’ exposure to China is increasing, monitoring the financial risks of China and minimizing their impact on Korea remain priorities.