South Korea is the fourth largest economy in Asia, attracting a number of our clients. South Korea is home to many world-class companies employing cutting-edge technology in the production of everything from mobile phones to ships, which are exported globally. Open trade policies gives the country access to international markets, which has been further advanced by the many free trade agreements the Korean government has signed.

We keep our clients informed of the latest market moves and political developments in South Korea as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 21 of the country’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you ahead of the curve in South Korea, so business is made easy.

Country Risk

South Korea Country Risk

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Core Views

  • Although the US and South Korea are likely to establish a working group to explore the deployment of the THAAD missile defence system in the latter country, Seoul is likely to postpone the actual introduction of THAAD, owing to Chinese opposition and concerns about a regional arms race. With parliamentary elections due on April 13, conservative South Korean politicians are likely talking up THAAD to bolster their support.

  • South Korea's 2015 real GDP growth came in at 2.6%, slightly higher than our forecast of 2.4%. We maintain our real GDP forecast for 2016 at 2.8% due to our expectations for only a modest pickup in economic momentum. High levels of household debt will undermine the government's plans to drive growth through domestic demand, while external demand is likely to remain weak due to the slowdown in the Chinese economy.

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South Korea Operational Risk Coverage (9)

South Korea Operational Risk

BMI View:

BMI View: South Korea boasts a sophisticated and well integrated logistics network which facilitates efficient supply chains and a relatively reliable utilities supply for the country's major industries. The export driven economy is set to record healthy growth over the medium term and investment in the transport network will improve already strong international connections and enable it to cope with expanding trade volumes. South Korea is therefore a global outperformer in the overall BMI Logistics Risk Index, with a score of 80.1 out of 100 placing it third in the Asia region and eighth out of ...

South Korea Crime & Security

BMI View:

BMI View: South Korea's operating environment is generally characterised by significant levels of security and stability, minimising risks to businesses and investors. The country's low crime rate and minimal terrorist threats increase its attractiveness, while strong policing and military security organisations maintain domestic order and international protection. However, the constant threat of aggression from North Korea dampens South Korea's overall security prospects, with regular prolonged periods of heightened tensions leading to increased risk of miscalculation or belligerence leading to full-scale conflict. In the meantime, high numbers of cyberattacks from across the border threaten to disrupt South Korea's sophisticated internet infrastructure and the core operations of individual businesses. Finally, South Korea's history of organised crime gangs continues, with numerous...

South Korea Labour Market

BMI View:

BMI View: South Korea's labour market is reasonably well suited to attract foreign businesses. It boasts a high level of education and employable skills amid reasonably high unemployment. This means there is a large number of educated, skilled labourers seeking work, representing significant opportunity for employers. However, the major risks involve a shrinking labour force - the result of an aging population - and the limitations and pressure placed on South Koreans by the rigid education system. Overall, South Korea receives a Labour Market Risk score of 67.6, placing it sixth out of 30 states in the Asia region.

The education system in South Korea is regionally and globally excellent. South Korea boasts one of the most intensive education-orientated cultures in the world, with academic success and scholastic achievement considered one of the...

South Korea Logistics

BMI View:

BMI View: South Korea has a very developed logistics network, with a high-quality and diverse transport network providing good access to international supply chains. Businesses will further benefit from the minimal trade procedures and low trade costs. That said, while utilities costs remain low for now, over the long term we expect South Korea's overdependence on raw material imports to drive up costs if it fails to diversify its energy supply.

South Korea's transport network provides extensive transportation links across the country for both cargo and passengers. Road is the predominant form of freight transport, and extensive and high-quality roads traverse the country. The country's high-quality rail infrastructure, with bullet-style trains such as the Korea Train eXpress (KTX) reaching up to 350km/h, facilitates quick and efficient transport across the island,...

South Korea Trade & Investment

BMI View:

BMI View: Open trade and investment policies have facilitated South Korea's development into an important hub for international trade and FDI, driving industrial production and economic growth. The country consequently offers a highly conducive environment for foreign investors, particularly in its advanced manufacturing industry. The financial sector provides strong international connections and good availability of credit to businesses and consumers. The investment climate is also augmented by South Korea's moderate tax rates, which may be reduced by incentive programmes, efficient bureaucracy and strong rule of law. Some concerns remain over comparatively elevated tariff barriers to trade and restrictions on foreign involvement in certain sectors; however, these are offset by South Korea's extensive development of special economic zones and a broad...

South Korea Industry Coverage (30)

Agribusiness

South Korea Agribusiness

BMI View:

BMI View: The South Korean agricultural sector holds a modestly subdued outlook over our forecast period. The livestock industry has been plagued with various disease outbreaks in the past that have largely been contained since. Government-led efforts will benefit the industry over the longer term and help it to remain relevant. These include the expansion of education and financial support for farmers to allow them entry into the food processing business; plans to modernise traditional methods of food production; the creation of new agricultural food districts for exporters; and the introduction of state designation of food exporting companies.

Key Forecasts

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Autos

South Korea Autos

BMI View:

BMI View: Despite external headwinds dragging on total vehicle sales in 2016, passenger vehicles sales and commercial vehicles sales are forecast to grow 1.5% and 2.4% respectively. This in turn will drive total vehicle sales to grow 1.7% in 2016, and at an annual average of 2.8% over our forecast period.

Total Vehicle Sales To Remain Positive Despite External Headwinds
Total Vehicle Sales By Segment
f = BMI forecast. Source:...

Commercial Banking

South Korea Commercial Banking

BMI View:

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Consumer Electronics

South Korea Consumer Electronics

BMI View:

BMI View: The maturity of South Korea's consumer electronics market means volume growth opportunities are limited, but we believe performance will be stronger over the medium term than 2013-2015 when spending contracted. A shift from won depreciation to appreciation supports market value forecast, while we also factor in a stabilisation of product trends that will contribute to stronger performance. The TV set, PC and handset markets have been in decline due to a concentration of first-time buyers, and subsequent adjustment to replacement centric markets, but we expect stabilisation over the medium term.

Won Appreciation And Product Cycle Stabilisation Creates Brighter Outlook
Consumer Electronics Spending Forecast By Segment
...

Defence & Security

South Korea Defence & Security

BMI View:

BMI View: We expect South Korea's defence budget to continue increasing in absolute terms in the next five years. This will be driven by South Korea's need to maintain well-prepared and well-equipped armed forces to deter, or defend from, an attack from North Korea. Moreover, the 2014 Defence White Paper puts significant emphasis on the government's desire to continue expanding the domestic defence market, providing additional support to private companies seeking to participate and increasing exports worldwide. This will contribute to opening up development opportunities for both international and national companies operating in the defence sector.

The conflict that has been characterising South Korea's relationship with North Korea in the past sixty years remains to date the country's main driver for defence spending. Indeed, despite many attempts from...

Food & Drink

South Korea Food & Drink

BMI View:

BMI View: We have a positive outlook on South Korea's food and drink industry over our five-year forecast period to 2019, as a well developed market in South East Asia. Premiumisation in the food and drink industry will lead growth sales as the market is set to reach saturation. The South Korean consumer is moving towards a more westernised culture, adapting new diets and lifestyles. The MGR sector will be dominated by strong local players as we see multinational companies start to pull out of the market.

Headline Industry Data (local currency)

  • Total food consumption growth year-on-year (y-o-y) in 2015: +1.1%; compound annual growth rate (CAGR) 2014-2019: +3.3%.

  • Per capita food consumption growth (y-o-y)...

Freight Transport

South Korea Freight Transport

BMI View:

BMI View: We expect to see moderate growth across the different freight modes in Korea in 2016. Road freight will post the strongest growth across the freight modes, growing by 4.6%, as the uptick in consumer spending will benefit this mode the most. Rail freight growth will increase to 3% in 2016 as the good performance of the domestic construction sector in light of the Winter Olympics in 2018 will drive demand for iron and steel. Air freight will see its growth rate decline to 2% as import demand from China for Korea's consumer electronics will be weak. Over the medium term, we expect the Korean freight sector to benefit from the recently ratified FTA with Vietnam.

Over the short-term we hold a bearish view with regards to the Korean economy as the moderate recovery in the domestic economy will be insufficient to offset the stronger than...

Information Technology

South Korea Information Technology

BMI View:

BMI View: We have made a further downgrade to the IT market growth forecast for South Korea in the Q415 update. This downgrade reflects weak sales of hardware in H115 reported by retailers and a weakening of economic sentiment following the downturn in regional equity markets in August 2015, which made a recovery in sales during H215 a more remote possibility. Performance in the hardware market will be weakest in 2015, with contraction forecast due to saturation, a weaker consumption outlook and the fact some upgrade demand was brought forward to 2014. However, the outlook for the software and services segments is significantly stronger...

Infrastructure

South Korea Infrastructure

BMI View:

BMI View: We maintain our growth forecast for South Korea's construction sector, noting the infrastructure sector, with the energy and utilities sub-sector in particular, will provide limited support to growth. However, this will be insufficient to offset the declines in the residential construction market due to the implementation of new mortgage rules from early 2016 and high levels of household debt, which will limit demand for residential property.

Latest Updates And Structural Trends

  • We expect South Korea's construction sector to expand slightly, growing by 1.41% in 2016 and 1.32% in 2017, supported by government investment in infrastructure and continued building in the run-up to the 2018 Pyeongchang Winter Olympics.

  • Overall building industry growth will remain in negative territory over our...

Insurance

South Korea Insurance

BMI View:

BMI View: Both the life and the non-life segments of South Korea's sophisticated insurance sector should benefit from the ageing of the population. There are upside risks to our forecasts for the life segment and for the long term products that are offered by the non-life insurers. There are some downside risks to our forecasts for property and motor vehicle insurance.

Headline Insurance Forecasts (South Korea 2012-2019)
Indicator 2012 2013 2014...

Medical Devices

South Korea Medical Devices

BMI View:

BMI View: South Korea will be one of the slower growing markets within BMI's Asia Pacific region, although it will still outperform other mature markets such as Japan, New Zealand and Australia. Medical device imports will come under further pressure from locally produced products in certain sectors. Although the domestic manufacturing industry remains fragmented, the number of producers has more than doubled in recent years and domestic output will continue to see steady growth as South Korea seeks to further reduce its reliance on imported products, whilst boosting its share of the global market.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD)...

Metals

South Korea Metals

BMI View:

BMI View: We have increased our 2016 tin price forecast to USD16,500/tonne owing to a stabilisation in the Chinese economy over Q116 that has boosted all industrial metal prices significantly over January-April. While we expect consolidation over the remainder of 2016, tin prices will continue to recover beyond 2016 as the global market posts sustained market deficits and inventories dwindle.

Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f ...

South Korea Metals

BMI View:

BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.

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Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

South Korea Metals

BMI View:

BMI View: Despite the strong H116 iron ore price rally, prices will edge lower due to weakening Chinese consumption over the latter half of 2016. From 2017 onwards, iron ore prices will remain subdued as iron ore prices remain under pressure from an over-supplied seaborne market, driven by strong production growth in Australia and Brazil, and weak consumption growth in China.

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Global - Iron Ore Production Forecasts
2013 2014 2015e 2016f

South Korea Metals

BMI View:

BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

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Global Nickel Forecasts
2013 2014 2015e

South Korea Metals

BMI View:

BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

South Korea Metals

BMI View:

BMI View: We have raised our gold price forecast for 2016 to USD1,275/oz and have a new five-year price target of USD1,400/oz. We have turned more positive towards prices due to rising inflation pressures and our view that real rates will remain depressed in developed markets beyond 2016. A modest rise in prices will be insufficient to reverse the trend of weak mine investment and industry consolidation.

BMI Gold Forecasts
2014 2015 2016f ...

South Korea Metals

BMI View:

BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

South Korea Metals

BMI View:

BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

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Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

South Korea Metals

BMI View:

BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

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BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Mining

South Korea Mining

BMI View:

BMI View: Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to fulfil its potential over the next few years. China's economic slowdown will remove a crucial outlet for raw material exports in the region and, more importantly, will impact the profitability of mining ventures, with high start up costs likely to deter new investment. While states such as Myanmar have made strides to relax the regulatory environment to encourage increased private sector investment, substantial obstacles remain across many parts of the region, including high levels of corruption and limited infrastructure. As such, many parts of the region continue to be perceived as frontier markets as far as mining activity is concerned.

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SE Asia - Mining Sector Industry Values

Oil & Gas

South Korea Oil & Gas

BMI View:

BMI View: South Korea will remain a global refining powerhouse, due to the sheer size of its refining sector and the sophisticated nature of existing refineries. Tepid consumption growth outlook for refined fuels amid rising competition externally will encourage refiners to lower run rates in the coming years, negatively impacting exports. Hefty off-take arrangements with international suppliers suggest that Korea is at substantial risk of having over-contracted its gas needs.

Headline Forecasts (South Korea 2014-2020)
2014 2015e ...

Petrochemicals

South Korea Petrochemicals

BMI View:

South Korea's petrochemicals output growth will be challenged by dwindling demand from China, as well as the deepening supply glut in the domestic petrochemicals market, which will push down prices and reduce margins. However, the industry's competitiveness coupled with its high value product slate should help producers maintain revenues going forward.

South Korea's integrated petrochemicals supply chain and high value added will enable it to capitalise on growing demand opportunities for petrochemicals in the region's emerging economies. For example, Indonesia's emergence as a regional auto manufacturing hub will increase its demand for synthetic rubber and engineering plastic over the next five years. India's sluggish capacity growth is also widening the gap between demand and domestic supply. These factors should help offset some of the decline in growth of exports to China.

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Pharmaceuticals & Healthcare

South Korea Pharmaceuticals & Healthcare

BMI View:

BMI View: South Korea's biomedical research and development sector will continue to flourish in line with growing investments by local drugmakers. Facilitating this commitment is the strong support provided by the government as well as the opportunities to form drug discovery partnerships with leading US-based companies. As the sector develops, the broader economy will benefit and serve to support South Korea's export growth.

Headline Expenditure Projections

  • Pharmaceuticals: KRW16,590bn (USD15.8bn) in 2014 to KRW17,117bn (USD14.6bn) in 2015; +3.2% in local currency terms and -7.1% in US dollar terms. Forecast unchanged from previous quarter, negative growth in USD terms due to currency fluctuations

  • Healthcare: KRW108,...

Power

South Korea Power

BMI View:

BMI View: The outlook for South Korea's renewables industry remains muted, despite the recent announcement of the government's clean energy investment plan. The country's challenging regulatory environment for renewables and the availability of cheaper sources of power, notably nuclear and coal, will undermine investment in the sector.

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Headline Power Forecasts (South Korea 2015-2021)
2015e 2016f 2017f 2018f

Real Estate

South Korea Real Estate

BMI View:

BMI View: South Korea's highly developed commercial real estate market will continue to benefit from a welcoming business environment and increasing foreign investment. On the demand side, though, a slowdown in China and faltering private consumption could limit appetite for new space across the board. Nonetheless, the outlook for South Korea's commercial real estate in the longer term is bright, as a result of the country's highly developed retail industry and economic diversification strategies.

Real GDP is set to grow slowly but steadily over our forecast period to 2019, increasing by 2.8% in 2015 before rising to 3.4% a year between 2016 and 2019. This should set to scene for continued stability in the...

Renewables

South Korea Renewables

BMI View:

BMI View: South Korea will remain dependent on coal and nuclear for its power generation over our 10-year forecast period, despite small gains made with its renewable energy expansion. The prevalence of cheaper fuels will undermine investment into the renewables sector, but we note that the project pipeline for wind power has strengthened over the last six months. We expect 3.3GW of installed wind capacity by 2024.

Renewables Headline Forecasts (South Korea 2014-2020)
2014e 2015f 2016f ...

Shipping

South Korea Shipping

BMI View:

BMI View: Our forecasts for South Korea's two main ports anticipate positive growth in 2016, although these figures will post a slight drop on our estimated figures for 2015. Box growth at the Port of Incheon will be the annual outperformer, at 9.7% growth, although over our medium-term forecast period to 2019 the highest port growth will be seen in box throughput at the Port of Busan. With the Chinese economic slowdown mostly abating, and growing real GDP and GDP per capita growth, we see a good macroeconomic foundation on which the shipping industry can reap dividends over the next couple of years.

Growth at South Korea's two major ports, the Port of Busan and the Port of Incheon, will post slightly lower figures in 2016 than those we estimate for the country in 2015. The exception to...

Telecommunications

South Korea Telecommunications

BMI View:

BMI View: Ongoing efforts by the operators to improve their network infrastructure in a bid to cater to rising demand for faster data transmission will provide further impetus to 4G market growth in South Korea. In addition, spectrum auctioned in 2015 could provide the foundation for 5G services.

Growth Driven By 4G Migration
South Korea Mobile Forecasts
f = BMI forecast. Source: BMI, MSIP, operators

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Tourism

South Korea Tourism

BMI View:

BMI View: Tourism in South Korea will grow over the forecast period. Inbound tourism, driven by increasing numbers of Chinese visitors, will see particularly strong growth. The sector suffered a setback with an outbreak of MERS in 2015 and so South Korea has recently announced a number of plans for cooperation with other Asian countries in an attempt to boost these figures. The Korean government have also recognised the appeal of Korean pop culture across Asia and have recruited a leading soap opera actor as tourism ambassador. The hotel sector remains relatively underdeveloped with only a handful of the major international chains having a presence in the country, however, with the Winter Olympics scheduled in the country in 2018 driving up demand for accommodation, this sector should provide strong opportunities going forward.

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Key Forecasts (South Korea 2013-2020)

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