Confidence that the Korean economy will gain ground in the second half of this year is growing on the back of a rosier outlook for the global economy.
Economic indices showing solid rebounds in production in the U.S., China and the eurozone, Korea’s three biggest trading partners, are fueling projections that Korea could regain a growth rate of 4 percent.
U.S. manufacturing activity measured by the Institute of Supply Management hit a record of above 50, improving employment in the sector in July.
The purchasing managers index, a gauge of production, in China and the eurozone have also soared, alleviating concerns of a regional slowdown and a recession, respectively. China’s manufacturing performed better than expected, while Europe’s production surged for the first time in two years.
An index reading above 50 means an economy is growing.
With the three biggest economies’ production expanding above the 50 threshold, the prospects for the Korean economy also appear rosier on the back of strong exports, Korea’s main growth driver that accounts for about 60 percent of its gross domestic product.
Korean exports overall increased 2.6 percent in July, from a contraction of 0.1 percent in the previous month.
The country’s outbound shipments to China grew 14.5 percent in July, and 8.5 percent to the U.S. from a year earlier, thanks to growing overseas sales of IT and electronics products.
Even exports to the European Union, hit by a recession, remained in positive territory over the last two months.
The positive indicators are driving foreign investment banks to revise their economic projections of the Korean economy.
Bank of America Merrill Lynch, for instance, recently readjusted its Korean forecast from 2.6 percent to 2.7 percent growth.
Deputy Prime Minister and Finance Minister Hyun Oh-seok recently said that its positive picture of the global economy could drive Korean exports to increase 5 percent in the second half of this year, from near zero percent in the first half.
By Park Hyong-ki (
hkp@heraldcorp.com)
