Economy Shows Signs of
Picking up Led by Exports
- DPM Lee cautiously optimistic economic recovery around corner

Deputy Prime Minister and Finance and Economy Minister Lee Hun-jai said Feb.4 that signs of economic recovery are now being observed. Although it has yet to become apparent, a variety of economic indicators in the past month or two have suggested the economy is improving when compared to data from late last year. DPM Lee said that he is cautiously optimistic that this could be the typical transition period that precedes a full-fledged economic recovery.
Exports were up 19.5 percent in December last year and 18.5 percent in January and are expected to continue this upward trend to post a minimum of $20 billion per month in outbound shipments for at least the first half of this year, the top economic official in the country said. Domestic and external economic conditions, in the United States and China in particular, have become more stable than initially forecast, which has helped boost exports even further.
The latest US rate hike of 0.25 percent basis points and expected continuation of rate hikes at measures pace as announced by the US Federal Reserve Bank, for instance, are likely to help stabilize the won since it suggests the U.S. dollar is likely to appreciate, DPM Lee said.
He continued by commenting on the chances of a soft landing for the Chinese economy. Despite the lingering Chinese yuan revaluation issue, he predicted that a soft landing has become more likely, and pointed to specific Chinese economic indicators to support his opinion. Real estate prices and inflation, for instance, have stabilized. Consumer price increases were down from 5.2 percent in September 2004 to 2.4 percent at the end of the year. Fixed assets investment growth also moderated from 23.8 percent in the third quarter to 24 percent in the fourth quarter of 2004.
Given these realities and the fact that Chinese exports have continued on a steady growth trajectory, a crash for the Chinese economy is unlikely for the time being, DPM Lee concluded.
With regard to domestic economic conditions, after a long period of negative economic sentiments recent indicators have been positive, strongly suggesting a turnaround in domestic demand is near, DPM Lee said. Credit card use, oil consumption and auto sales, for instance, have all improved. Credit card use began to pick up in the second half of 2004 and has increased even further in recent months, from 4.9 percent in the third quarter of 2004 to 10.6 percent in the fourth quarter and 14.8 percent in January of this year.
Just as important, he explained, is the good news that credit card delinquencies have been decreasing steadily since July 2004 and the household loans to income ratio that topped out at 67 percent is expected to decline to 63 percent in 2005.
Domestic auto sales have also picked up, with a 5 percent increase in last month. Oil sales also increased. Department store sales have experienced about 9 percent growth if food items are excluded. Service sector activity is accelerating. Facility investment is rising and the real estate market seems to be rebounding from the slump it has been battling.
The impact of slowing construction orders for the past year has now become apparent, however, as this sector of the economy is contracting, at least for the time being. The construction component of a recent business survey index(BSI) has improved dramatically, though, on the strength of large construction company sentiments, despite the temporary slowdown.
Producer price increases have been slowed by a large margin since September last year. Although it is too early to comment on the impact this will have on producer and consumer prices, DPM Lee nonetheless suggested that taking into account the won appreciation, producer and consumer prices would not become an obstacle to an economic recovery and thus the economy. A more detailed assessment will be possible in February and March, but the important point is that economic sentiments are moving in the right direction, he added. nw