Country Risk Service South Korea
The Economist Intelligence Unit, March 2013, Pages: 23
The election as president of the conservative Park Geun-hye, who was inaugurated in February, broadly presages policy continuity. She will maintain a pro-business approach, but will take steps to rein in the power of South Korea's conglomerates. Park Geun-hye has pledged greater engagement with North Korea, but recent events may hinder that effort in the short to medium term. Real GDP is forecast to expand by 2.8% in 2013. Economic expansion will be driven primarily by private consumption growth this year, as the external sector's contribution will remain meagre. The economy will then expand by 3.9% a year on average in 2014-17. In 2013 average inflation is expected to fall just below the central bank's 2.5-3.5% range. Price rises will average 2.8% a year in 2014-17. The current-account surplus will grow in 2013, to the equivalent of 4.3% of GDP, owing mainly to an increase in the trade surplus.
In March North Korea threatened "pre-emptive" action against its enemies and abrogated its non-aggression pacts with the South. The risk of outright conflict is limited, but the North's moves nonetheless increase the risk of miscommunication between the countries involved.
The president has set out plans for a "paradigm shift" in the country's economic management, with welfare, and growth with equity, to be the defining concepts. The path to increased welfare is relatively clear, as are the fiscal risks of such an approach. Balancing economic growth with equity will be less straightforward, and the policy blueprint released in February provides only sketchy outlines.
Country Risk Service South Korea
South Korea at a glance: 2013-17
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Sovereign risk
Current assessment
Positive factors
Negative factors
Outlook
Currency risk
Current assessment
Positive factors
Negative factors
Outlook
Foreign-exchange regime
Banking sector risk
Current assessment
Positive factors
Negative factors
Outlook
Generic risks
Political risk assessment
Economic structure risk assessment
Country risk
Overall country risk
Rating definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk
Central scenario for 2013-17: Political stability
Central scenario for 2013-17: Election watch
Central scenario for 2013-17: International relations
Central scenario for 2013-17: Policy trends
Central scenario for 2013-17: Fiscal policy
Central scenario for 2013-17: Monetary policy
Central scenario for 2013-17: Economic growth
Central scenario for 2013-17: Inflation
Central scenario for 2013-17: Exchange rates
Central scenario for 2013-17: External sector
Central scenario for 2013-17: External financing requirement
Central scenario for 2013-17: External debt
Key risk indicators
Ratings summary
Quarterly indicators
International assumptions summary
Economic structure
Public finances
Exchange rates, interest rates and prices
Financial sector
Current account
International liquidity
Foreign payment and liquidity indicators
External trade
External financing requirement
External debt stock
External debt service
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