Economic Shadows
The national income of Korea declined for the first time in four and a half years in the second quarter of this year, led by a decrease in the interest and dividend income that Korean companies take from overseas subsidiaries. In the meantime, the GDP growth rate for the same quarter is estimated at 0.3 percent compared to the preceding quarter. If this is the case, Korea’s QoQ GDP growth remains below 1 percent for the fifth consecutive quarter.
The Bank of Korea announced on Sept. 3 that Korea’s real GNI fell 0.1 percent from a quarter ago in Q2. The most recent negative GNI growth was witnessed in the last quarter of 2010, when it lost 1.9 percent. Also, the real GNI growth rate was exceeded by the real GDP growth rate in three quarters, by a margin of 0.4 percentage points at this time. The decline in real GNI was because foreigners’ income in Korea increased on the contrary to the income of Koreans abroad, with the real GDP growth rate remaining at a low level. Specifically, Korea’s net factor income from the rest of the world dropped from 5.6 trillion won (US$4.7 billion) to 1.3 trillion won (US$1.0 billion) between Q1 and Q2.
Securities investment gains changed little, from approximately US$400 million during the period, but direct investment dividends fell from US$2.5 billion to US$2.2 billion. This can be attributable to a decline in the dividend income of Korean enterprises with overseas subsidiaries. “This year, more direct investment dividends were paid in Q1, which was unusual, to affect the national income growth rate for Q2,” the central bank explained, adding, “The net factor income from the rest of the world increased from 5.1 trillion won [US$4.3 billion] to 6.9 trillion won [US$5.8 billion] between the first halves of last year and this year.”
In Q2, the nominal GNI declined 0.5 percent from the previous quarter and gained 4.3 percent compared to the same period last year. The GDP deflator rose 2.7 percent year-on-year, showing the highest rate of increase since Q4, 2010. The savings rate fell from 36.5 to 35.3 percent between Q1 and Q2, while the gross domestic investment ratio edged down from 28.1 to 28.0 percent, to continue to fall for three quarters in a row.