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

  • The passing of South Korea's controversial history textbook law is unlikely to strengthen the opposition NPAD's position in the legislative elections that will be held in April 2016. While the NPAD has obtained a marginal victory by opposing the law, the heated debates between the party and the ruling Saenuri have demonstrated that both are more concerned with political showmanship while parliament has yet to pass the budget for 2016. This will accordingly weigh on both their performances in the legislative election that will be held in April 2016.

  • South Korea's Q315 real GDP grew by 2.6% y-o-y, reflecting a recovery from the previous quarter. Despite stronger growth, we have downgraded our forecast for 2015 real GDP growth to come in at 2.4% compared to 2.8% previously, as the recovery in the domestic economy will be insufficient to offset...

South Korea Operational Risk Coverage (9)

South Korea Operational Risk

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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

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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

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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

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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

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BMI View: Trade and investment risks are low in South Korea owing to the country's open economy, relatively low fiscal and trade barriers and minimal red tape plaguing its bureaucracy, as well as the effective enforcement of the rule of law. As a result, despite a dip during the global financial crisis, foreign investment inflows are recovering, a trend we expect to continue in the foreseeable future. That said, risks remain for foreign investors, notably a number of burdensome taxes and the weak enforcement of physical property rights. For these reasons, the country receives an overall score of 67.8 out of 100 in the BMI Trade And Investment ...

South Korea Industry Coverage (21)

Agribusiness

South Korea Agribusiness

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BMI View: We hold a modestly subdued outlook for the South Korean agricultural sector. The livestock industry has been plagued with various disease outbreaks in the past that have largely been contained. 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

  • Cheese consumption growth to 2019: 29.5% to 138,6...

Autos

South Korea Autos

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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

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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

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BMI View: We have left our forecasts unchanged in the Q1 2016 report update for the South Korean consumer electronics market. We had downgraded our forecast for the South Korean consumer electronics market in the Q4 2015 update, with weak H1 2015 sales and deteriorating economic confidence after the slide in regional equity markets in August 2015. South Korea saw a very steep decline in 2015, with the market contracting by almost 13%. In 2016, we estimate a minor contraction of under 2%, with total market value reaching USD17.9bn. The South Korean market remains complex and saturated. For instance, in the smartphone market, not only is penetration high, but LTE handsets and phablets have also already passed through the initial boom phase. Meanwhile, in the AV segment, HD TV set ownership is widespread, and in the PC market, all core markets are saturated. Although market maturity means South Korea...

Defence & Security

South Korea Defence & Security

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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

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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 downgraded our growth forecast for South Korea's construction sector on the back of a weaker export outlook weighing on non-residential construction. The residential building segment remains a bright spot, supported by favourable credit conditions and housing policies, which will provide some respite over the next two quarters.

...
Infrastructure - Construction Industry Forecasts (South Korea 2014-2020)
2014 2015f 2016f 2017f

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)...

Mining

South Korea Mining

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BMI View: The cooling of the Chinese economy will remove the shine off mining investment in South East Asia. Frontier regions will be the first places where miners pull back their investment as brownfield projects take precedence. Nonetheless, it is certainly not all gloomy in the mining sector. Resilient demand from the power sector will continue to support growth in coal production, while Indonesia's export ban on unprocessed ores will help support bauxite prices.

Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to uncover its potential over the coming years. The cooling of Chinese economic growth will remove a crucial pillar of support for mineral prices, particularly industrial metals such as iron ore and copper. For...

Oil & Gas

South Korea Oil & Gas

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BMI View: Even as we expect the current lower oil price environment to continue to support refining margins and lower crude feedstock costs, the slowdown in demand in South Korea's major refined fuels exports markets, notably China, will keep a lid on exports growth over the next decade. We also note that while South Korea will remain a sizable net importer of LNG through to 2024, muted economic growth and energy diversification in the power sector will see the country's import requirements gradually trend downwards over the long-term.

...
Headline O&G Forecasts (South Korea 2013-2019)
2013 2014e

Petrochemicals

South Korea Petrochemicals

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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.

...

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 into the sector.

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Headline Power Forecasts (South Korea 2014-2020)
2014e 2015e 2016f 2017f

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

...

Tourism

South Korea Tourism

BMI View:

BMI View: South Korea's tourism industry demonstrates significant growth potential. The country boasts numerous attractions and continues to expand both domestic and international travel connections in order to facilitate growth in the tourism market. The hotel and accommodation sector is relatively underdeveloped, particularly outside of the capital, and with visitor numbers increasing we expect to see significant investment in new hotels, including a focus on high-end and luxury properties. While there are risks to potential growth, such as a further MERS outbreak or increase in tension with the country's northern neighbour, the present outlook for South Korea's tourism industry is highly positive, making this an...

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