Institute foresees a bleak 2015 for key industries
The key word for the Korean economy next year will be STOP, short for sandwiched, traffic jam, oversupply and price competitiveness, according to a report by the Hyundai Research Institute on Sunday.
The report said the country will be sandwiched between advanced and newly industrialized competitors in major industries like automobiles and IT, which will create a traffic jam where it will be difficult for the economy to pick up speed. The nation’s steel and petroleum industries might be seriously affected by an oversupply of Chinese products, and other sectors will lose price competitiveness due to the weak Japanese yen.
“The overall economy in each industry will not improve much compared to this year, considering that the world economy isn’t going to grow much, either,” said an institute spokesman.
The report said Korea’s global market share in seven key industries - automobiles, shipbuilding, machinery, steel, IT, petroleum products and chemicals - improved to 4.7 percent in 2013 from 3.4 percent in 2000. Japan’s global market share in those sectors was 5.3 percent last year, but most concerning is China, whose share of the world market jumped from 2.2 to 11.7 percent.
“Posco and the nation’s other leading steelmakers might have a serious headache next year due to a surplus of Chinese products, which would definitely lower prices,” said the spokesman. “The weak Japanese yen will also be a serious problem. If the exchange rate for the won falls below 950 for 100 yen, Korea’s total exports might fall by 5.8 percent from this year. If the rate falls under 900 won, exports could drop by 8.2 percent.”
The exchange rate on Friday was 943 won to 100 yen.
The bigger problem is that Korea’s loyal customers and newly industrialized nations like Brazil, Russia and India could buy cheaper Chinese products, according to the institute.
In a survey by the Korea Trade-Investment Promotion Agency of 100 buyers from 34 nations from Oct. 31 to Nov. 10 in cooperation with the Newsis news agency, all buyers from Southeast Asia said they would consider buying cheaper Chinese products, while 80 percent of Russian buyers, 61 percent of African buyers and 37.5 percent of buyers from the Middle East said they would do likewise.
“China’s overall technical skills in many industries are still behind those of Korea, but they offer good quality products at low prices that people in developing countries can afford,” said the institute spokesman.
Such a trend is apparent in the UN’s international manufacturing competitiveness index, which shows Korea improving from 12th in the world in 2000 to fourth in 2010, and China jumping from 23rd to seventh.
The report predicted some improvement in the construction, shipping and machinery industries.
“As the country’s real estate market is expected to grow next year and the government’s budget for SOC [social overhead capital] will increase, there will be more civil and public engineering projects next year,” said the spokesman. “The government needs to carefully think about how it will adjust monetary policies next year to improve the country’s economic growth prospects.”
BY KWON SANG-SOO [firstname.lastname@example.org]