NABO Economic Trends (No. 45)

Published on October 24, 2024
Published by Economic Analysis Coordination Division

■ Economic Trends
   Our economy has recently demonstrated strong export growth, primarily driven by ICT and a recovery in manufacturing production. However, economic improvement remains constrained due to persistent sluggishness in construction investment and a slowdown in employment growth. External uncertainties are also rising amid escalating Middle East conflicts. In August, retail sales rose by 1.7% MoM but fell by 1.3% YoY, while facility investment dropped by 5.4% MoM, impacted by declines in transportation equipment and machinery. In September, exports and imports grew by 7.5% and 2.2% YoY, respectively, expanding the trade surplus to USD 6.66 billion. The September consumer prices increased by 1.6%, marking the first time in 41 months it has entered the 1% range since March 2021. August industrial production saw a 1.1% YoY increase across all industries, with manufacturing up 3.7% and services up 0.9%. Yet, the cyclical component of the coincident composite index within the Composite Economic Index fell for the sixth consecutive month since March. Employment in September rose by 144,000 YoY, with the unemployment rate down by 0.2%p YoY to 2.1%. In the domestic financial market, the decline in three-year treasury bond yields slowed to 3.0% by the end of September, while the won/dollar exchange rate dropped to 1,320 won. However, volatility is growing as the won/dollar rate rises significantly in October.

■ Pending Economic Issues: Impact of Military Restructuring on the Local Economy
    As military resources decline due to demographic shifts, ongoing military restructuring aims to reduce the number of active troops and units. This restructuring is likely to have negative local impacts, particularly in reduced consumption, service industry employment, local government revenue, and population outflow. However, it may also open opportunities for local development, new employment, and income generation that were previously constrained by military presence. Through case studies of military base closures, strategies for revitalizing the local economy needed to be explored. To this end, regions likely to be significantly affected by restructuring were identified and the growth rate of Gross Regional Domestic Product (GRDP) by economic activity was analyzed. The analysis showed a slowdown in GRDP growth in border areas with high dependency on military installations, notably in the service sector driven by local demand. In the medium to long term, the potential for further population decline due to job losses remains high. Tailored regional strategies are essential to mitigate the economic impact of reduced military presence and population outflow. For instance, in border regions with rapid GRDP growth in agriculture, forestry, and fisheries, industries leveraging local resources, such as agriculture, forestry, fisheries, the ecological environment, and the DMZ, can be fostered. Additionally, fostering new growth drivers will require collaboration among public, private, and military sectors to build consensus and work cohesively.