The Banking and Strategy Initiative

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Korea: A country capsule

Korea parallels India’s GDP of $1.5 trillion ($1.4T(trillion) at current exchange rates) but while India has started planning for double digit growth in GDP ( *nominal GDP likely to be $1.75 T next year -2011) Korea is faltering , alternating between bad and good quarters.

Speed Skating

Korea can easily recover, however, per Capita GDP already $27,700 with none of the attendant problems in Debt, a benign 28% exposure in public debt. The domestic debt is also not very unmanageable at $1T, and Dimon’s JP Morgan finds comfort in the speed of this tiny asian tiger, much like many others before in the previous decade. FDI stock at $90 billion has kept the economic engine chugging at an ave growth rate of 4% over the last decade and they may come back to the same rate this quarter

With China continuing a clampdown in exports, 12.5% of the Korean GDP is at a risk of contraction. The converse weakening of the Korean Won however may be good enough to signal a longer lasting recovery this year. However Korea’s example is now a known challenge of early withdrawal of stimulus. Probably the rate increase control of any economy is overdone with the sensitive fixed income markets around the world esp as their repeat of the Q4 inactivity could really threaten the growth of 2010.

Kia, LG, Hyundai and Samsung lead the 35% strong Manufacturing sector, while Services, not as high as other Next 11 or Asian Tiger economies. Singapore has been the exemplary destruction of value in Asia losing 16% and 12% in Q4 2008 and Q1 2009 before coming back in Q2 2009. Singapore’s move was mostly driven by a stengthening Singapore Dollar along with its Australian Dollar counterpart. Also, surprisingly, China saves more with Australia than its export partner Korea.


This entry was posted on February 12, 2010 by in Amitonomics, Emerging Markets, Financial Markets, Global, Retail Lifestyle and tagged , , , , .


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