South Korea's foreign trade, industrial output and consumption are expected to grow in the second half of the year, according to a report released Sunday by a state-run economic think tank.
The report, compiled by the Korea Institute for Industrial Economics and Trade (KIET), said most of the country's top 10 industries will post positive growth, with the exception of textiles and clothing.
South Korea's leading industries are auto manufacturing, shipbuilding, general machinery, steel, petrochemicals and textiles, information technology (IT), consumer electronics, computers, telecommunications and semiconductors.
It said the auto, steel, petrochemical, telecommunications, computer and semiconductor industries are all expected to have greater production in the coming months than in the first half.
Autos, semiconductors, and telecommunications may grow 7.1
percent, 19.6 percent and 12.1 percent, respectively, according to a simulation run by the think tank. It said even industries that can expect dips in growth rates, like shipbuilding and consumer electronics, could make good gains.
"Enhanced competitiveness, the general health of the global economy and domestic demand are all likely to cause industrial output to rise," the report said.
In addition, the KIET said export growth of the top 10 industries could reach 10.4 percent in the second half, up from 7.3 percent growth from January through June.
Six the top 10, including autos, shipbuilding, steel, telecommunications and semiconductors, are expected to post higher growth rates in the second half than in the first. The KIET forecast the auto and shipbuilding sectors will respectively grow 16.7 percent and 23.5 percent in the coming months, with semiconductor exports to grow 16.9 percent.
It said exports of clothing and textiles, consumer electronics and computers are to remain in negative territory, while the growth of petrochemicals may decline.
Overall, exports of all products and goods could grow in the 11 percent range in the coming months, with annual growth reaching around 12.6 percent for the whole year to US$320 billion. In the first half, export growth reached just under 14 percent.
"While large companies are prepared for the possibility of continued unfavorable exchange rates, smaller companies are expected to be affected by lower volume and profits vis-a-vis the first half," said Youn Woo-jin, the head of the KIET's economic survey division.
Imports by the top 10 industrial areas are also likely to grow 11.2 percent in the second half from 7.7 percent in the first six months of the year, due to an improvement in domestic consumption and a rise in imports of parts. For the whole country, imports of goods may grow 10.8 percent in the second half, with annual growth to reach 12.0 percent. The current account surplus could hover at $5-$6 billion from around $15 billion last year.
On domestic consumption, a key factor in growth, the research institute said demand for IT products and autos are to post solid growth.
"Interest in the latest advances in mobile phone technology, like digital multimedia broadcasting, could rise by over 21 percent," said Chang Suk-in, head of the KIET's leading industry division said. He said new car models will help auto sales climb by around 4.6 percent. Most electronics-related figures will post double-digit gains, he added.
Chang said rises in income will allow consumption to post 4.2
percent growth from July until the end of the year, allowing annual growth of about 4.5 percent.
On the effect of industrial sector growth on the economy as a whole, the KIET report said South Korea's gross domestic product could grow 5.1 percent, compared to 4.0 percent in 2005.
It also estimated that business investment may grow 7.4 percent for the entire year as gains in production and exports put pressure on companies to expand their manufacturing bases.
Investment is important because it leads to jobs that can fuel consumption and stimulate more production. The report said investment in the construction sector, whose growth dipped to 0.4
percent in 2005, could edge up to 1.2 percent this year.
The KIET, however, said despite the prospects for improvement in industrial sectors, government policymakers need to listen to complaints of businesses so growth can be maintained into next year.
"While the second half of this year may not be bad, there are concerns that growth may slacken in 2007, particularly in the second half," said Youn Woo-jin.
The expert said moves to prop up the economy through more government spending are not ideal, and that restrictions on business investment and expansion should be eased. Youn said this would help companies hire more people and increase their capabilities.
The expert cited the current investment ceilings on 59 large conglomerates and the ban on expanding operations into overcrowded areas around Seoul as restrictions that should be examined.
In response, Cho Won-dong, head of the Finance Ministry's economic policy bureau, said the government is aware of complaints by businesses and is looking into them, hinting that some changes may be made.
The policymaker cautioned that while some private think tanks like the Samsung Economic Research Institute have forecast annual growth to fall to 4.8 percent for the year, the figure is probably not accurate.
Cho said the country should be careful of over-pessimism on the economy, since such a trend could have an adverse effect on the actual economy that is making progress.
Seoul, July 2 (Yonhap News)
Trade, industrial output, consumption to increase in second half |
