NABO Economic and Industry Trends & Issues (No. 10)
Published on 23 October 2020
Published by Macro-Economic Analysis Division of the Economic Analysis Bureau
I. Economic and Industry Trends
The Korean economy has recently recovered from weak exports, but is exhibiting continued weakness in terms of domestic demand due to the resurgence of COVID-19. Exports in September reversed to increase (7.7%) YoY, as global economic activity recovered and trade volume increased. Domestic demand remains low due to weak production and a worsening job market from the resurgence of COVID-19. Consumer prices increased by 1.0% YoY, recording a higher increase rate than that of the previous month (0.7%). The won-to-dollar exchange rate in September exhibited strong performance, while the treasury bond yield increased MoM and equity prices go through a correction period.
Ⅱ. Pending Issues in the Economy and Industry
■ Domestic and Overseas Status of the Li-ion Battery Industry and Implications
As country-specific exhaust gas emissions have increased since the 2015 Paris Agreement on Climate Change, each country have been pursuing increased utilization of environmentally-friendly vehicles. While analyses reveal that the export competitiveness of Korean Li-ion batteries is strong, the main materials used for the batteries are relatively dependent on imports. Battery manufacturers in each country are pursuing M&As to secure competitiveness, as well as developing next-generation batteries such as solid-state batteries. In this respect, it is necessary to secure the raw material supply chain required for stable battery production, and also develop next-generation batteries tailored to new consumer demand.
■ Post-COVID-19 Credit Card Payment Authorization Records by Sector and Region
The number of domestic credit card payment authorizations decreased between March and April when COVID-19 was widespread and social distancing was reinforced. From May, the figures reversed to an increasing trend as social distancing rules were relaxed and emergency disaster relief funds were paid out. By sector, the number of credit card payment authorizations decreased significantly in terms of transportation, business facilities management and business support services. In terms of region, large decreases of credit card usage were witnessed in Daegu, Gyeongbuk province and Jeju. As non-face-to-face transactions such as online shopping surged due to COVID-19, wholesale and retail sales as well as credit card payment authorizations in Seoul and Gyeonggi province exhibited a positive trend.
■ Examination of Decoupling Risk Factors between the Recent Real Economy and Stock Indices
Entering into 2020, economic indicators have been affected by COVID-19 and deteriorated by a widening gap. Against this background, Korean stock prices are exhibiting a rising trend as the market enjoys increased liquidity and more inflows of individual investment funds, leading to an aggravation of decoupling between the real economy and stock prices. Measures to respond to potential risks incurred by the gap between the stock market rally and the real economy should be reviewed, while examining credit risks related to individual investors’ investment funds and the risk of sudden inflows and outflows of funds, taking into account that the margin balance within the stock market is increasing by a widening gap.
■ Outcomes and Implications of the 2019 Population and Housing Census
As of November 1st, 2019, the total Korean population increased by 150 thousand (0.3%) from the previous year to 51.78 million, while the total number of Korean households increased by 390 thousand (1.9%) from the previous year to 20.89 million, exhibiting a higher pace of increase in terms of the total number of households than the total population. The low-birth rate and aging phenomenon have led to a decrease in younger aged population and increase in senior aged population of 65 years and older, while the number of households with one or two family members has exhibited an increase. Also, when compared to 2018, the population and number of households have increased in the metropolitan area (Gyeonggi, Incheon) as well as the Sejong-Chungcheong region.
Ⅲ. Economic and Industry Issues
■ Trend and Status of the Wage Gap Between Regular and Irregular Employees: Focusing on University Graduates’ Entry-Level Positions
Since the wage gap between regular and irregular employees may give rise to social costs such as widening income disparity and restricted corporate productivity increases, it is necessary to narrow unreasonable gaps incurred by different types of employment. A thorough analysis of university-graduates’ entry-level wages revealed that the entry-level wage gap among different types of employment is smaller than the gap between different types of employment found among all wage-workers, whereas 40-50% was considered unreasonable. In addition, while the entry-level wage gap among different types of employment decreased between 2010 and 2017, such change was mainly due to the reduction of unreasonable attributes. In addition, according to a comparative analysis, there was also a wide gap between regular and irregular employees in terms of social insurance subscription rate and the rate of fringe benefit payouts. Side effects incurred by such differences should be mitigated by reducing the unreasonable gap between different types of employment through institutional supplementation.