Country Report South Korea October 2009

Outlook for 2010-11

• The president, Lee Myung-bak of the ruling Grand National Party, will continue to face difficulties in maintaining the full support of his party and improving public confidence in his abilities as a leader.
• A recent cabinet reshuffle seems to have been broadly welcomed, with talent being brought in from across the political spectrum. However, Lee Myung-bak will continue to face problems in maintaining cohesion within his party.
• South Korea's diplomatic relations with North Korea have continued to improve, with the North once again allowing reunions involving separated families. However, ties will remain volatile.
• In 2010-11 the government will begin to reverse the emergency economic stimulus measures taken in 2009, although it will do so gradually as the economic outlook remains uncertain.
• Improving economic indicators have led the Economist Intelligence Unit to revise up its forecast for real GDP growth in 2010 to 2.8% (from 2.1% previously), after an estimated decline of 1% in 2009.
• The won will appreciate from an annual average of W1,296.9:US$1 in 2010 to W1,222.8:US$1 in 2011, supported by a current-account surplus and capital inflows.

Monthly review

• On September 3rd Lee Myung-bak reshuffled his cabinet for the third time in the 18 months since he took office. This was his most extensive reshuffle yet, and many commentators have welcomed the changes.
• The third-largest party in the National Assembly (parliament), the Liberty Forward Party, has split, in part owing to differences between the two joint leaders of the party.
• The thaw in relations with North Korea has continued. On August 29th the North released four South Korean fishermen. It has also withdrawn demands for a 40% wage increase for North Koreans working for South Korean firms.
• South Korea's rigorous fiscal stimulus campaign in the past year appears to be lifting the country's economy from the worldwide recession faster than many of its industrialised peers.
• The financial sector regulatory, the Financial Supervisory Service, is stepping up its risk-management guidance for commercial banks in view of their risky consumer lending practices.
• The government has revised up its real GDP growth figure for the second quarter of 2009 on a quarter-on-quarter basis to 2.6%, from 2.3%.

This report covers the following industry codes:
SIC Code: 39
NAICS Code: 31