It’s ugly and getting uglier. Heck, things stateside aren’t too pretty either especially when you have 60,000 layoffs anounced in one freakin’ day!
It’s bad news and badder news:
- Although technically not a recession, Korea’s economy dropped 5.6% in the fourth quarter 2008.
- However, Morgan Stanley estimates that Korea’s economy will drop 2.8% in 2009. Two consecutive negative quarters is the academic definition of a recession and it’s highly unlikely that the first quarter 2009 will have positive GDP growth.
- Korea isn’t the only Asian country catching the economic contagion. Japan and China are wheezing as well.
- The bottom isn’t here yet, because the economic slowdown hasn’t hit full stride in China, who is Korea’s largest export market. The economy is so bad in China that people are actually moving back into the farms from the factories. It’s reverse development folks!
Well, any good news?
- The weaker won has made Korean exports more attractive compared to Japanese and Taiwanese competition.
- Hyundai/Kia’s sales are actually up over 6% (although overall profits are down).
- Samsung has faced its first quarterly operating loss ever, but it has enough cash reserves to weather the storm.
Okay, the actual good news at this point is extremely slim pickings and I expect the economic data in the first quarter 2009 to all but confirm that Korea’s recession started in Q4 of 2008. The biggest issue will be the severity of the recession, not if Korea will fall into one. That, in my mind, is a foregone conclusion.
Update: Excellent article in the ever dependable Economist regarding the economic difficulties in East Asia. Korea is a little different from the rest of the economies of the region in that it’s a drop in consumer spending, not a drop in exports, that have fueled the GDP decline. Korean exports have actually caused a net increase in GDP, which indicates that exports are actually a bright spot for the economy, something I alluded to earlier above.