Slump in major countries weighs on Korean economy

The global economy is turning unfavorable to South Korea as four major economies ― the U.S., China, the eurozone and Japan ― are showing worse-than-expected performance indicators.

Korean policymakers recently bolstered their monitoring of the global market amid the concern that a continued slowdown in the global economy could deal a blow to Korea.

According to London-based financial information & services firm Markit, the four major economies saw their Purchasing Manager’s Index, an indicator of manufacturers’ expectations of the state of the economy, drop in April from a month before.

In particular, all of their PMI indices were found to have stayed below earlier market forecasts, leading to concerns that the global economy is weaker than earlier projections.

The United States had raised hopes for fast recovery, with its GDP growth of 4.6 percent in the second quarter and 5.0 percent in the third quarter, respectively, of last year. But its fourth-quarter growth stood at 2.2 percent.

Further, research analysts predict the GDP growth during the first quarter of 2015, to be publicized this week, will be modest, at about 1 percent.

Private consumption, which accounts for around 70 percent of the U.S. economy, has continued to sag, and U.S. manufacturers have faced an export slump due to the dollar’s strong position against major currencies.

The eurozone’s quantitative-easing appears to be overshadowed by economic downturns in France and Germany. Worries that Greece will default on its national debts is also countering the consumption-boosting effects of the EU’s monetary easing.

China has continued to see its growth rate fall. After peaking at 10.4 percent, its GDP growth recorded 9.3 percent in 2011 and 7.4 percent in 2014. Its first-quarter growth this year stood at 7 percent.

Japan is also showing a similarly protracted recovery. Moody’s Investors Service and Fitch Ratings have downgraded the country’s sovereign bonds by one notch, respectively.

Choi, however, clarified that policymakers “would closely monitor the indices (at home and abroad) until the end of the first half,” hinting at not taking hasty measures amid global uncertainty.

Amid the growing difficulty of local exporters, the U.S. dollar fell again versus the Korean currency to close at 1,070 won on Tuesday. The Japanese currency sank below the 900-won mark to close at 898.56 won per 100 yen.

Stocks of the nation’s main exporter Hyundai Motor fell for the second consecutive trading session to close at 172,500 won.

Korea’s Deputy Prime Minister and Finance Minister Choi Kyung-hwan recently raised the possibility that the domestic economy would see a recovery during the second quarter.

Choi, however, clarified that policymakers “would closely monitor the indices (at home and abroad) until the end of the first half,” hinting at not taking hasty measures amid global uncertainty.

Amid the growing difficulty of local exporters, the U.S. dollar fell again versus the Korean currency to close at 1,070 won on Tuesday. The Japanese currency sank below the 900-won mark to close at 898.56 won per 100 yen.

Stocks of the nation’s main exporter Hyundai Motor fell for the second consecutive trading session to close at 172,500 won.

By Kim Yon-se (kys@heraldcorp.com)