Posted July. 11, 2002 22:04,
The domestic and international economic indicators are showing opposite trends. While domestic economy indicators are showing improving results, international economic environment shows deteriorating result.
The unemployment rate has decline around 2% since May foreign exchange crisis. In June, it has dropped to 2.7% and its showing continuous decline rate for four months straight. The National Statistical Offices estimation of number of unemployment for current month amounts to 611,000, which is 7.6% less than previous month.
Investment and exports situations are also improving. Investment rate of plants and equipment in May shows 5.1% increase compare to same month in the previous year. It is due to increase in machinery export and import, which are indicators of future business condition. However export rate has shown only 0.5% increases. According to analysis, minor increase in export is result of relaxed production rate and decrease in working days due to the World Cup match. The export rate is forecasted to increase back about 10% in July.
Even through the business conditions improvement, inflation rate shows only 2% increase. That is below the governments target projection of 3% and gives advantage to government economic policies. The current rate of money circulation, distribution rate of bond, and etc are stable. The decreasing stock prices have shown reactionary rise due to recent continuous purchases of foreign investors.
However the international economic situation is somewhat unstable. Especially the increase in the Won currency value (decrease in Won-Dollar exchange rate) begun to pressurize the profitability of export companies and the deteriorating U.S. financial market is destabilizing the export market.
The value of Won currency is increasing in proportion to increase of Japanese Yen value over U.S. Dollar. According to released report Foreign exchange market trend of 2×4 quarter (April ~ June) by the Bank of Korea, the coefficient rate of Won and Yen currencies is 0.92 ~ 0.97. This means that probability of Won value increase, if Yen value increases is over 90%.
Due to this alignment situation, price competitiveness of domestic export goods shows almost no change over Japanese exports. However compare to Chinese Yuan currency, which has fixed exchange rate with the U.S. Dollars, the Won value has increase 13% contrast to the value in the beginning of the year. The LG Economy Research Institute warns that the domestic exports will face s tough competition from Chinese exports.
Recent instability in U.S. financial market amplifies the doubts for U.S. economic recovery. But government sees low probability for financial market situations to result decrease in consumption rate.
According to Park Byuong-won, Economic Policy Director of Ministry of Economy and Finance, Regardless of international economic situation, the vigor in domestic economy is due to high increase in domestic consumption. The fundamentals of U.S. economy is sound, therefore the foreign exchange market will be soon be stabilized.