NABO Industry Trends and Issues (No. 12)
September 21, 2018
Industry & Employment Analysis Division of the Economic Analysis Bureau
I. Household income, real estate market, and commodities market trends
(Household income trends) The average household monthly (nominal) income in the second quarter of 2018 rose 4.2 percent compared to the same period the previous year. The S80/S20 income quintile ratio on disposable equivalised household income was 5.23, a 0.50 point increase from the same period the previous year (4.73). Nominal incomes of working and non-working households rose from the same period the previous year (7.7 percent and 0.2 percent, respectively).
(Real estate market trends) In August 2018, the housing price volatility (MoM) was 0.02 percent, shifting to an upward trend. From January through August, housing prices rose in Seoul, Gyeonggi, Daegu, Gwangju, Daejeon, Sejong, and Jeonnam, but fell in other areas. The jeonse* and monthly rent prices nationwide dropped 0.16 percent from the previous month, with all areas exhibiting a downward trend except Seoul, Gwangju, and Jeonnam.
(Financial and commodities market trends) Interest rates are falling, foreign exchange markets remain unchanged, and stock prices are volatile amid heightened recent financial market risks resulting from the U.S.-China trade disputes and financial stability issues in emerging markets. Prices of agricultural and non-agricultural commodities are on the decline due to increased global uncertainties and the fall in demand.
* A housing rental system unique to Korea, jeonse refers to a large lump sum deposit made instead of monthly rent payments.
Ⅱ. Global competitiveness analysis of major product items of the Fourth Industrial Revolution
An analysis was made of seven product items (electric cars, intelligent robots, cutting-edge medical devices, aerospace devices, lithium secondary batteries, next-generation displays, and system semiconductors), which are identified to be the most relevant to the Fourth Industrial Revolution and for which a comparison of international export performance is feasible. The analysis monitored export trends and compared the global competitiveness of each item using an export-competitiveness matrix. The result showed that Korea is globally competitive in four product items—electric cars, lithium secondary batteries, system semiconductors, and next-generation displays—and highlighted the need for a strategy of differentiation with focused investments in key technology developments so that products with high export competitiveness can remain competitive. The analysis also suggested a need to enhance the competitiveness of the less competitive products through R&D investments and greater government support to increase exports.
Ⅲ. Korea’s growth path and its implications for North Korea’s economic development
In the course of economic growth, Korea has coherently adopted a growth-led strategy towards resource mobilization, investment allocation, and technology acquisition, while pursuing an open and competitive market economy. Growth accounting revealed that factor inputs were the most important factors contributing to the nation’s growth in its early phases of economic development, while later on, productivity gradually became more significant. Official development assistance served to prime the pump for the economy up until the 1970s, but subsequently, the country saw a continuously increasing internal capital accumulation. The growth path of South Korea suggests that it would be beneficial for North Korea to introduce external capital input, improve institutional arrangements to enable internal capital accumulation, and enhance productivity. In this context, inter-Korean cooperation will likely contribute to rising productivity in North Korea through the transfer of South Korea’s growth experience.