The OECD has warned that the South Korean economy has begun to slow down. The downtrend is likely to continue for a while in view of the rising oil prices and ongoing restructuring in major local industries.
The OECD said on May 13 that South Korea’s composite leading indicator (CLI) reached 99.8 in February this year, falling for the 10th consecutive month. Its CLI topped 100 in October 2014 and remained above it before reaching its peak of 100.9 in April last year. In January and February this year, however, it reached 99.8, dipping below 100 for the first time in 40 months.
Meanwhile, the CLIs of many other countries are on the rise. The average CLI of OECD member countries has continued to rise since July 2016, when the indicator marked 99.5. It exceeded 100 in April last year and is currently 100.1 to 100.2.
According to the OECD, any rebound of South Korea’s CLI is rather unlikely for the time being. This is because its economic conditions for the second quarter of this year are not favorable although the economy showed a year-on-year growth of 1.1% in the first quarter of this year.
International oil prices, a decisive factor affecting the economy, are forecast to continue to rise. The Bank of Korea recently pointed out that the global oil inventory has been on the decline since early 2017 due to a supply cut by oil producing countries while the oil demand has remained solid based on a global economic upturn.
At the same time, Korea’s major industries, including automobile, shipbuilding and steel, still remain sluggish amid restructuring. In March this year, South Korea’s automobile production fell 12.5% from a year earlier. Its shipbuilding output has been on the decline for almost five years since it posted a negative growth of 11.9% in May 2013.