South Korea Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

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  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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South Korea Country Risk Report
Product Price
$1,195.00

Core Views

  • The passing of South Korea's controversial history textbook law is unlikely to strengthen the opposition NPAD's position in the legislative elections that will be held in April 2016. While the NPAD has obtained a marginal victory by opposing the law, the heated debates between the party and the ruling Saenuri have demonstrated that both are more concerned with political showmanship while parliament has yet to pass the budget for 2016. This will accordingly weigh on both their performances in the legislative election that will be held in April 2016.

  • South Korea's Q315 real GDP grew by 2.6% y-o-y, reflecting a recovery from the previous quarter. Despite stronger growth, we have downgraded our forecast for 2015 real GDP growth to come in at 2.4% compared to 2.8% previously, as the recovery in the domestic economy will be insufficient to offset the slowdown in the external sector. We have also downgraded our real GDP forecast for 2016 to 2.8% from 3.0% previously, as external demand is likely to remain weak due to the slowdown in the Chinese economy.

  • The country's expansionary budget reflects the challenges the government faces as it tries to strike a balance between attaining its fiscal goals and supporting growth, and will result in short-term fiscal strain for the government.

  • In line with our expectations, the Bank of Korea (BoK) held its base rate at 1.50% during its monetary policy meeting on November 12. We forecast interest rates to remain on hold throughout 2015 and have pared back our rate hike expectations for 2016, forecasting rates to remain on hold instead. Stable inflation, a fragile domestic recovery, and continued external uncertainty will prompt the BoK to maintain its monetary stance in a bid to keep borrowing costs low over the near-term.

  • The Korean won will continue to experience depreciatory pressure against the US dollar in the near term amid external headwinds. Over the long term, a solid current account surplus and positive real interest rates will provide support to the won, limiting depreciatory pressures.

Major Forecast Changes

  • We have downgraded our forecast for 2015 and 2016 real GDP growth to come in at 2.4% and 2.8% respectively, compared to 2.8% and 3.0% previously.

  • We have pared back our rate hike expectations for 2016, forecasting rates to remain on hold instead.

Key Risks

  • 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 substantial weakening in its exports sector, which, in turn may push the economy into a pronounced recession.

  • Political Risks Rising: An increasingly belligerent North Korea poses a latent security threat, and any nuclear test could lead to a flare up of tensions on the Korean peninsula.

Macroeconomic Forecasts (South Korea 2013-2016)
Indicator 2013 2014 2015f 2016f
National Sources/BMI
Nominal GDP, USDbn 1,305.9 1,410.3 1,313.0 1,321.6
Real GDP growth, % y-o-y 2.9 3.3 2.4 2.8
Consumer price inflation, % y-o-y, eop 1.1 0.8 1.2 1.8
Exchange rate KRW/USD, eop 1,049.80 1,090.98 1,200.00 1,225.00
Budget balance, % of GDP 1.0 0.6 -2.4 -2.8
Current account balance, % of GDP 5.4 6.3 6.8 7.0
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
Worsening Ruling Party Rift To Impede Economic Revitalisation
8
Table: Political Overview
8
South Korea Long-Term Political Outlook
9
Constitutional Reform To Improve Governance-
9
North Korea Domestic Politics
11
N-S Korea Crisis Averted, But Tensions To Persist
11
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
Growth To Pick Up Slightly In H215
18
table: Economic Activity
18
Fiscal Policy
19
Supplementary Budget To Support H215 Growth
19
table: Fiscal Policy
20
Monetary Policy
21
BoK To Keep Rates Steady
21
table: Monetary Policy
21
FX Forecast
22
KRW: Near-Term Weakness, Medium-Term Stability
22
Table: CURRENCY FORECAST
22
table: Current Account
23
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
Market Size And Utilities
31
table: Asia - Market Size & Utilities
32
International Security Risk
35
table: Asia - Interstate Conflict Risk
36
Chapter 5: Key Sectors
41
Pharmaceuticals & Healthcare
41
table: Pharmaceutical Sales, Historical Data & Forecasts
42
table: Healthcare Expenditure Trends, Historical Data & Forecasts
43
Tourism
44
table: Inbound Tourism
45
table: Outbound Tourism
46
Other Key Sectors
49
Table: Oil & Gas Sector Key Indicators
49
Table: Autos Sector Key Indicators
49
Table: Infrastructure Sector Key Indicators
49
Table: Food & Drink Sector Key Indicators
50
Table: Defence & Security Sector Key Indicators
50
Table: Telecoms Sector Key Indicators
51
Table: Freight Key Indicators
51
Chapter 6: BMI Global Macro Outlook
53
Global Macro Outlook
53
China Crisis To Have Far-Reaching Impact
53
Table: Global Assumptions
53
Table: Developed States, Real GDP GrowtH, %
54
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
54
Table: Emerging Markets, Real GDP Growth, %
55

Assess your risk exposure in South Korea with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in South Korea with confidence.

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