No Breakthrough in Sight
South Korea’s manufacturing capacity utilization was 74.3% in the third quarter of this year, the lowest since the Asian Financial Crisis of 1998. In addition, its capital expenditure fell 19% from a year earlier in September, which is close to the decrement recorded during the 2008 global financial crisis. Besides, the number of unemployed persons topped one million for nine months in a row until that month, which was the largest since 1999.
The thing is, no breakthrough is in sight unlike 10 and 20 years ago. “South Korea could overcome the past crises based on its industrial competitiveness and by selling its companies, but today’s crisis is a real economic crisis and no one wants to buy local companies,” said National Economic Advisory Council (NEAC) Vice Chairman Kim Gwang-doo.
Six out of seven major economic indices have deteriorated to the 1998 and 2008 levels, that is, cyclical components of leading and coincident indices, capital expenditure, retail sales, manufacturing capacity utilization, employment and unemployment rates, and industrial output. Although export figures are still positive, those excluding semiconductor exports are negative.
The cyclical component of composite coincident index, which shows current economic conditions, was 98.6 in September, a 2009 level. The cyclical component of composite leading index was at a 2009 level of 99.2, too.
The capital expenditure growth has remained negative for the longest period since 1997. The manufacturing capacity utilization was 74.3% in Q3, 0.1 percentage points lower than that of 2009 and 1.8 percentage points lower than that of 1999. The manufacturing output from Q1 to Q3 fell 1.5% year on year with the steepest decline since 2009, when it had dropped by 5.6%. Consumption is showing little increase in spite of fuel tax and special excise tax cuts.