South Korea Country Risk Report

Published 23 June 2015 | Quarterly

  • 62 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
$1,195.00
South Korea Country Risk Report

Core Views

  • The landslide victory in the April 29 by-elections shows that South Korea's ruling Saenuri party retains considerable support despite corruption allegations against senior party members. The victory will support President Park Geun-hye's ongoing efforts to improve the economy by enabling the passage of revitalisation bills through parliament.

  • South Korea's Q115 real GDP grew by 2.4% year-on-year (y-o-y), reflecting the economy's second slowest growth rate in nine quarters. With the country facing dual headwinds in the form of weak external demand and anaemic domestic conditions, we maintain our forecast for 2015 real GDP growth to come in at 2.8%, below consensus expectations of 3.2%.

  • President Park Geun-hye's proposed drive to shift the economy away from manufacturing towards one led by innovation, if realised, will provide the Korean economy with new drivers of economic growth and set the country on a more sustainable path of economic expansion.

  • In line with our expectations, the Bank of Korea (BoK) held its base rate at 1.75% during its monetary policy meeting on May 15. We continue to forecast interest rates to remain on hold throughout 2015 as the BoK focuses on supporting economic growth amid both internal and external headwinds. However, with inflation remaining well below the BoK's target range, and exports struggling, we note that risks to this forecast are weighted to the downside.

  • We have a bearish bias towards the Korean won in the near term as external factors such as a sharply depreciating Japanese yen have a negative impact. However, positive real interest rate differentials versus the US, a strong current account surplus and large reserve build-up suggest the currency will be well supported.

Key Risks To Outlook

  • Downside Risks To Economic Growth Forecast: Should we see a sharper-than-expected downturn in the global economy or even an implosion in South Korea's household debt market, we would certainly expect to see a...

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
South Korea Domestic Politics
8
Rising Internal Discord Threatens To Undermine President's Power
8
TABLE: Political Overview
8
Political Outlook
10
Constitutional Reform To Improve Governance-
10
North Korea Domestic Politics
12
Some Positive Diplomatic Steps, But Volatile Policy To Persist
12
North Korea Long-Term Political Outlook
13
Status Quo Increasingly Unsustainable
13
Chapter 2: Economic Outlook
17
SWOT Analysis
17
BMI Economic Risk Index
17
Economic Activity
18
Bearish Outlook Informs 2015 Downgrade
18
TABLE: Economic Activity
18
Fiscal Policy
20
Tax Reforms To Have Limited Impact
20
TABLE: Fiscal Policy
20
Monetary Policy
21
Rates To Remain On Hold Despite Downside Risks
21
TABLE: Monetary Policy
21
Exchange Rate policy
22
KRW: Maintaining Our Neutral Stance
22
TABLE: CURRENCY FORECAST
23
TABLE: Current Account
24
Chapter 3: 10-Year Forecast
25
The South Korean Economy To 2024
25
Slower Growth To 2024
25
TABLE: Long-Term Macroeconomic Forecasts
25
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
TABLE: Operational Risk
30
Availability Of Labour
31
TABLE: Asia - Availabilit y Of Labour Risk
32
TABLE: Labour Force Emplo yment By Sector (-000), 2007-2012
33
TABLE: Top Ten Migrant Sources By Country
34
Crime Risk
35
TABLE: Asia Crime Risk Scores
36
TABLE: Crime Statistics, 2007-2012
37
Chapter 5: Key Sectors
39
Automotives
39
TABLE: Autos Total Market - Historical Data And Forecasts
40
TABLE: Passenger Car Market - Historical Data And Forecasts
40
TABLE: Commercial Vehicle Market - Historical Data And Forecasts
41
Food & Drink
41
TABLE: Food Consu mption Indicators - Historical Data & Forecasts
43
TABLE: Hot Drink Value /Volu me Sales , Production & Trade - Historical Data & Forecasts
45
TABLE: Mass Grocer y Retail Sales By For mat - Historical Data & Forecasts
47
Other Key Sectors
49
Table: Infrastructure Sector Key Indicators
49
Table: Defence and Security Sector Key Indicators
49
Table: Telecoms Sector Key Indicators
49
Table : Phar ma Sector Key Indicators
50
Table: Oil and Gas Sector Key Indicators
50
Table : Freight Key Indicators
50
Chapter 6: BMI Global Macro Outlook
51
Global Outlook
51
Deflationary Pressure
51
Table: Global Assumptions
51
Table : Developed States , Real GDP Growt H, %
52
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
52
Table : Emerging Markets , Real GDP Growth , %
53

The South Korea Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in South Korea. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of South Korea's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of South Korea's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise South Korea's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in South Korea, including currency volatility, the commodity price boom and protectionist policies.

The South Korea Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the South Korea' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for South Korea through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The South Korea Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for South Korea and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on South Korea, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in South Korea over the next 5-years?

BMI's South Korea country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the South Korea Market - Political Strengths, Weaknesses, Opportunities and Threats facing South Korea.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for South Korea's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of South Korea’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark South Korea's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in South Korea?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks South Korea against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate South Korea’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in South Korea will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in South Korea's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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