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KOREA REPORT - AUGUST, 2023.
TOPICS.
SKorea, the US and Japan agreed to bolster security and economic cooperation at a Camp David summit on 18th that sought a stronger coalition on China and NK, signing for the first time a pledge to jointly respond to common security threats. The summit US President Joe Biden held with President Yoon and Japanese PM Kishida at his presidential retreat condemned China¡¯s ¡°dangerous and aggressive behavior¡± in the South China Sea, reaffirming peace and stability across the Taiwan Strait. In a statement, three leaders said they ¡°strongly oppose any unilateral attempts to change the status quo in the Indo-Pacific,¡± a reference to China¡¯s claims that, if necessary, it could take over Taiwan, a self-ruled democratic island America supports. Read More¡¦
Iranian funds worth an estimated $6 bil, frozen in bank accounts in Korea, have been released, following the US and Iran's tentative agreement. All of Iran¡¯s frozen funds in Korea have been unblocked, Central Bank of Iran Gov Mohammad Reza Farzin said on 12th. He said that $7 bil in Iranian assets in Korea have been converted into euros with the help of a bank in a third country and will be transferred to Iranian banks in Qatar. Farzin also mentioned the funds shrunk by nearly $1 bil in value due to the depreciation of the Korean won. No interest on the deposit was paid, he added. The Iranian funds were stuck in Industrial Bank of Korea and Woori Bank since May 2019, after two Korean banks refrained from processing them in response to US sanctions after former US President Trump unilaterally pulled out of the Iran nuclear deal.
Korea will reclassify COVID-19 to the same category as the seasonal flu starting Aug 31st, health authorities said on 23rd. COVID-19 will go down from class 2 to class 4, the lowest infectious disease category which comprises diseases such as seasonal flu, hand-foot-and-mouth disease, gonorrhoea and syphilis, that government considers manageable with stability. The decision was based on declining number of infections and stabilization of the quarantine situation. The daily average of new COVID-19 infections for the week of 13-19th was 41,698, marking a 16.4% decrease from the previous week's 49,893. There is no mask mandate for class 4 respiratory infectious diseases, but authorities decided to maintain the requirement for mask-wearing at vulnerable places, such as hospitals or medical institutions, for the time being.
SKorea's managed fiscal balance posted a deficit of KW83 tril ($63.9 bil) in the first six months of 2023, compared with KW101.9 tril tallied a year earlier, according to Ministry of Economy and Finance on 10th, amid lower revenue and expenditures. SKorea's tax revenue came to KW178.5 tril, down KW39.7 tril on-year due to a lower amount of income and corporate taxes collected. The total revenue dropped to KW296.2 tril, down KW38.1 tril on-year. Total expenditures came to KW351.7 tril over the period, down KW57.7 tril on-year, as the government spent less on pandemic-related projects. The government's debt had reached KW1,083.4 tril as of June, down KW5.3 tril on-year.
SKorea logged a trade surplus of $870 mil in Aug, for third straight month. Outbound shipments fell 8.4% on-year to $51.87 bil, as exports of semiconductors sank 21% on falling demand and a drop in chip prices. Those of petroleum products also tumbled 35% on-year. Imports fell 22.8% on-year to $51 bil in Aug, as energy imports retreated 42% on-year.
Hyundai Motor Group¡¯s economic impact on SKorea's economy outpaced that of Samsung Electronics (SEC) for the first time last year, according to CEO Score on 9th. The combined economic contribution of Hyundai and Kia came to KW164.6 tril ($124.7 bil), going beyond KW148.1 tril of Samsung Electronics. In 2021, Hyundai, world's third-largest carmaker, recorded KW138.9 tril, KW10 tril less than that of Samsung. Among top 100 Korean companies in terms of sales revenue, SEC showed the biggest drop in economic impact in 2022, down KW7.2 tril on-year. On the other hand, refiner GS Caltex witnessed the largest growth in its economic impact, logging KW54.3 tril, a jump of KW23 tril on-year. Its local rivals SK Energy and S-Oil came in at second and third place, posting growth of KW21.6 tril and KW13.9 tril, respectively. Overall, top 100 companies¡¯ combined economic wealth returned to stakeholders as economic impact surged on-year by 20.7% to KW1,472.8 tril last year.
SKorea's foreign reserves came to $418.3 bil as of end Aug, down $3.5 bil on-month, due to the US dollar's rise and market stabilization measures, according to Bank of Korea. Foreign securities had been valued at $379.03 bil as of end Aug, up $2.5 bil on-month, which accounted for 90.6% of foreign reserves. The value of deposits stood at $14.84 bil, sharply down by $6.1 bil on-month. SKorea ranked as world's eighth-largest holder of foreign reserves as of end July.
Bank of Korea on 24th kept its policy rate unchanged at 3.5%, maintaining it a fifth consecutive time amid growing China fears and a widened rate gap with the US. ¡°The board decided to hold the rate, projecting it would take significant time for the inflation rate, which has been on a slowdown, to fall to the target rate, while also considering the escalated volatility in the monetary policies and economies of major countries, and the need to keep a close watch on rising household debts,¡± BOK said.
SKorea's consumer price rose 3.4% on-year in Aug, according to Statistics Korea, highest on-year rise since 3.7% growth tallied in April. Core inflation rose 3.3% on-year in Aug. Prices of utility services continued to grow sharply, advancing 21.1%, as Korea Electric Power Corp raised electricity bills to make up for its snowballing losses. Those of agricultural and fishery products moved up 2.7% following heavy rains, with price tag of rice advancing 7.8% over the period. Price of apples soared 30.5%, while homegrown beef fell 6%. Prices of industrial products gained 2.6% on-year, led by clothes. Costs of diesel and gasoline moved down 16.9% and 4.6%, respectively.
From Jan to July this year, global shipbuilders secured 23.12 mil cgt (858 vessels), marking decrease of 25% compared to same period last year (30.67 mil cgt, 1,170 vessels). By country, in terms of share of orders, China secured 542 vessels of 13.01 mil cgt, taking lion¡¯s share of 56%. Korea won 152 vessels of 6.94 mil cgt, occupying 30% of its total, followed by Japan's 2.18 mil cgt (83 vessels, 9%). Compared to 2022, Korea and China¡¯s share decreased by 41% and 4%.
SHI paused construction of hulls for Arc7 LNG carriers, which were ordered by Sovcomflot, according to industry sources. Initially, SHI agreed to construct and deliver 15 hulls to Russia's Zvezda Shipbuilding Complex. Five of these have already been delivered, but remaining 10 are now on hold. Industry experts attribute the suspension to payment issues Sovcomflot is facing, caused by international sanctions against Russia. These sanctions followed Russia's invasion of Ukraine in Feb 2022. The total value of the original order is approx. $5 bil. Read more¡¦
SKorea's shipbuilding sector, struggling with labor shortage, hired over 10,000 workers during first half of this year. Ministry of Trade, Industry, and Energy and Ministry of Justice of SKorea announced on 30th that shipbuilding industry hired total of 10,104 production workers, including both Koreans and foreigners, from Jan to June. Among those, 8,388 were foreigners, and they were deployed to various shipbuilding sites across SKorea. According to the government, the number of workers hired in the first half of the year (10,104) is over 70% of the estimated 14,000 production workforce that the shipbuilding industry was expected to lack from Jan to Dec this year.
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