South Korean economy in worst quarterly performance since 2008

South Korean exports fell by 5.4 percent in the fourth quarter after leaping 6.1 percent a quarter earlier. (Reuters)
Updated 25 January 2018
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South Korean economy in worst quarterly performance since 2008

SEOUL: South Korea’s economy unexpectedly shrank in the last quarter as struggling car exporters and industrial production failed to keep up the previous quarter’s dashing pace, posting its worst performance since 2008.
An 10-day Chuseok autumn holiday in October hit fourth-quarter industrial output, just as a slump in car exports erased the gains from booming overseas sales of computer memory chips.
Hyundai Motor and its Kia Motors affiliate said earlier this month 2017 shipments were a million vehicles below their 8.25 million target after struggling with competitiveness problems and trade issues.
The Bank of Korea said on Thursday that gross domestic product fell by a seasonally adjusted 0.2 percent in the fourth quarter, sliding from bumper growth of 1.5 percent in the third quarter, which was the fastest expansion in seven years.
“There is a strong base effect after particularly high third quarter growth and as irregular factors such as the Chuseok holiday shortened the number of working days for businesses,” said Chung Kyu-il, director general at the bank’s Economic Statistics Department said at a news conference.
Thursday’s data reinforced a broad consensus that the central bank’s monetary tightening will be gradual this year as export- and investment-led growth moderates after rapid expansion in 2017.
The contraction in fourth-quarter 2017 undershot the 0.1 percent expansion seen by economists and marks the worst quarterly performance since the economy contracted by 3.3 percent on-quarter in the fourth quarter of 2008.
Exports fell by 5.4 percent in the fourth quarter after leaping 6.1 percent a quarter earlier, while private consumption growth accelerated to 1.0 percent from 0.8 percent, the BOK said in a statement.
The economy expanded 3.0 percent from a year earlier, slowing from 3.8 percent growth in the September quarter.
Chung added that on a half-year basis, the July-December period showed faster growth versus January-June 2017, indicating an overall improvement in growth momentum.
Moon Jung-hui, an economist at KB Investment & Securities said domestic demand will make up for slowing exports growth this year.
“The burst of investment and exports we’ve seen in 2017 won’t be sustained this year and will slow down. As the GDP data shows, the good news is that private consumption is picking up, and will support growth this year,” said Moon.
Construction investment fell 3.8 percent from a quarter earlier after the government said in October it would impose additional mortgage curbs on owners of multiple homes to discourage excessive borrowing.
The bank is monitoring the effects of its November hike, the first tightening in six years, and remains wary of triggering disruptive capital flows.
The BOK held its policy interest rate unchanged at 1.50 percent on Jan. 18 and upgraded its 2018 growth forecast to 3 percent, a fraction higher than the 2.9 percent projected in October last year.
It lowered its 2018 consumer inflation forecast to 1.7 percent from 1.8 percent, supporting analysts’ views that monetary policy will remain accommodative in 2018.


Gulf defense spending ‘to top $110bn by 2023’

Updated 15 February 2019
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Gulf defense spending ‘to top $110bn by 2023’

  • Saudi Arabia and UAE initiatives ‘driving forward industrial defense capabilities’
  • Budgets are increasing as countries pursue modernization of equipment and expansion of their current capabilities

LONDON: Defense spending by Gulf Arab states is expected to rise to more than $110 billion by 2023, driven partly by localized military initiatives by Saudi Arabia and the UAE, a report has found.

Budgets are increasing as countries pursue the modernization of equipment and expansion of their current capabilities, according to a report by analytics firm Jane’s by IHS Markit.

Military expenditure in the Gulf will increase from $82.33 billion in 2013 to an estimated $103.01 billion in 2019, and is forecast to continue trending upward to $110.86 billion in 2023.

“Falling energy revenues between 2014 and 2016 led to some major procurement projects being delayed as governments reigned in budget deficits,” said Charles Forrester, senior defense industry analyst at Jane’s.

“However, defense was generally protected from the worst of the spending cuts due to regional security concerns and budgets are now growing again.”

Major deals in the region have included Eurofighter Typhoon purchases by countries including Saudi Arabia and Kuwait.

Saudi Arabia is also looking to “localize” 50 percent of total government military spending in the Kingdom by 2030, and in 2017 announced the launch of the state-owned military industrial company Saudi Arabia Military Industries.

Forrester said such moves will boost the ability for Gulf countries to start exporting, rather than purely importing defense equipment.

“Within the defense sector, the establishment of Saudi Arabia Military Industries (SAMI) in 2017 and consolidation of the UAE’s defense industrial base through the creation of Emirates Defense Industries Company (EDIC) in 2014 have helped consolidate and drive forward industrial defense capabilities,” he said.

“This has happened as the countries focus on improving the quality of the defense technological work packages they undertake through offset, as well as increasing their ability to begin exporting defense equipment.”

Regional countries are also considering the use of “disruptive technologies” such as artificial intelligence in defense, Forrester said.

Meanwhile, it emerged on Friday that worldwide outlays on weapons and defense rose 1.8 percent to more than $1.67 trillion in 2018.

The US was responsible for almost half that increase, according to “The Military Balance” report released at the Munich Security Conference and quoted by Reuters.

Western powers were concerned about Russia’s upgrades of air bases and air defense systems in Crimea, the report said, but added that “China perhaps represents even more of a challenge, as it introduces yet more advanced military systems and is engaged in a strategy to improve its forces’ ability to operate at distance from the homeland.”