April was a good month for the economy following on strong growth in March. Exports growth was fabulous at 41.1% in April,YoY growth, up to US$51.1 bn, the highest total for April on record, only once nearly matched in 2016. PMI softened very slightly from 55.3 in March to 54.6. While infections remained high in the 500s-700s, there was no escalation to suggest that the fourth wave would rise to as higher a peak as the third wave. The level of social distancing remained intact with closer scrutiny of areas of higher risk. The CPI also rebounded to 2.3% the highest for a number of months, and a warning of limitations to growth which may be approaching.
Our fear in January had been that Q2 which should bring a rebound growth in GDP of perhaps 3.7% would be stymied by a fourth wave with a higher peak than the third, and further crippling of the service sector.
But it is still a two track economy with the export sector stronger than the domestic sector. YoY growth in Q1 was +1.4% higher than forecast, despite weaker government consumption than might have been expected. Private consumer expenditure was up 1%, largely because the well to do top 20% spent more, rather than an even growth of prosperity.
So May is a good month to make a health check on the Korean economy and society to assess how quickly the patient will recover, and which sectors of the economy will suffer from the equivalent of long covid. In the May session expect a review of where Korea is going and the constraints that begin to create boundaries to growth. These will include:
- worsening geopolitics
- inflationary pressure
- long covid industries
- the housing/demographic question
- equality aspirations vs inequality growth
- migration to a digital society (which we began to discuss in the last session)
- migration to a green and circular economy
- export growth and supply chain pressures
Please come and join the discussion in what we hope will be the final on line event and prepare for our assessment of the 70 chaebol’s prospects which will form the basis of our June 2021 session, which is expected to be a return to hybrid.
Although on May 20th session we shall be on-line, we hope that the level of infections will allow us to have our long postponed social evening at the Swiss Embassy.
Managing Director, KABC Ltd.