South Korea posted a record decline for industrial output in November and said its monthly current account surplus was halved in the month, fueling calls for interest rate cuts to bolster an export reliant economy grapping with the global slowdown.

Industrial production contracted by a seasonally adjusted 10.7 percent from October, the worst performance since August 1987, and by 14.1% year-to-year----its biggest plunge since the indicator was introduced in 1970s, according to figures released Tuesday by the National Statistical Office.

The data were significantly worse than the median forecasts of six economists polled by Dow Jones Newswires for a 4% month-to-month drop and a 7.5% fall from a year earlier. In October, output was down a revised, seasonally adjusted 2.2% on month and 2.3% on year.

I’ve never seen such a reading before said Standard Chartered Bank economist Chun Chung-woo. It’s even worse than it was in the late 1990s Asian financial crisis era.

The contraction in output---for the fifth straight month-----was reported the same day that the Bank of Korea posted a $2.06 billion current account surplus for November, down from a record 4.75% billion surplus in October.

A central bank official said the balance would remain in the black in December and noted that the November balance still was a strong surplus. Although exports are decreasing fast due to the global economic downturn, imports are likely to slow faster due to a drop in global oil prices, so the current account balance is likely to remain in the black this month, said Yang Jae ryong, a senior manager with the balance of payments statistics team at the central bank.

The current account data, combined with susp[ected dollar selling interventions by Korean authorities recently to strengthen the won, indicate that the local currency will likely get a further boost, said David Kim, an economist with Taurus Investment &Securities.

The dollar was at 1259.50 won late Tuesday in Seoul after the date’s release, down from 1263 won on Monday, with traders partly attributing the decline to intervention by the authorities. Market reaction to the industrial output data was swift. Korean treasury bonds and bond futures extended gains, with the March bond futures gaining 64 to 112.53 and the five year treasury yield down 0.27 percentage point to 3.75%, as investors took to the safety of fixed income.

Economists said the worst is yet to come. Now the market’s focus will move on to the nation’s industrial output data for December, which is likely to show even poorer results, boosting demand for bonds, said Samsung Securities analyst Nam Woodo.

This is a shocking number and today’s data show that the economy is deteriorating faster than expected
The 12 month average leading index, an indicator of how the economiy will perform, fell 2.8% from a year earlier, following a 1.5% fall in the preceding month.

The rapid slowdown in industrial activity has economists debating not whether the bank of korea should cut rates in its next policy meeting scheduled for Jan 9 but how deeply it should do so.

Since the leading index has slowed for a year and the capacity utilization rate also looks bad the BOK is likely to cut rates by 50 basis points next month.

Tge BOK cut its main interest rate by a full percentage point to 3% in December, its latest salvo in an easing campaign that begain in Ocober, The cuts were aimed at boosting the flagging economy, which expanded a revised, seasonally adjusted 0.5% in the third quarter---its slowest since the third quarter of 2004.

Worst data for November in 11 years, plus fall of current account surplus by half, fuel calls for deeper rate cuts.



(3rd LD) N. Korea vows to denuclearize peninsula, rebuild economy in New Year

By Kim Hyun
SEOUL, Jan. 1 (Yonhap) -- North Korea said Thursday that it will rebuild its ailing economy and aim for denuclearization in the New Year, in an apparent signal of its willingness to start afresh with the United States.

In a joint newspaper editorial that summed up policy goals for 2009, Pyongyang continued criticism of Seoul but made no hostile mention of Washington, just three weeks before the inauguration of a new U.S. administration.

"The independent foreign policy of our Republic to denuclearize the Korean Peninsula and defend peace and security of Northeast Asia and the rest of the world is demonstrating its validity more fully as the days go by," the editorial jointly issued by the North's ruling party, army and youth military said.

Pyongyang sees the inauguration of U.S. President-elect Barack Obama on Jan. 20 as an opportunity to start afresh after eight years of largely sour relations with the outgoing Bush administration. Six-party talks aimed at denuclearizing North Korea are essentially on hold until Obama takes office. The latest round ended without progress in December.

North Korea "will develop relations with the countries friendly towards us and make a positive contribution to achieving the cause of global independence," the editorial, carried by the North's Korean Central News Agency.

Pyongyang will continue to uphold its military-first policy, but this year's statement displayed an increased focus on the economy. The military-first policy, called "son-gun," was adopted by leader Kim Jong-il in 1995, a year after his father and the country's founder Kim Il-sung died at age 82. The father-to-son power transfer was the first-ever in a communist state.
"To relieve scarcity of food is a pressing problem," the editorial said. "We should concentrate all efforts on hitting this year's target of grain production with the extraordinary determination to solve food problems by our own efforts in any circumstances."
North Korea's harvest slightly increased in 2008, but the U.N. World Food Program says nearly a quarter of its population of 23 million still needs outside food aid.

The global economic crisis weighs heavily on the North, as its export volume falls and outside aid staggers. South Korea's central bank says North Korea's economy shrank 2.3 percent in 2007, following a 1.1 percent fall a year earlier.

"An important task facing us in the economic construction at present is to surpass the high-water mark in production in all sectors of the national economy," the editorial said.

Ko Yu-hwan, a North Korea specialist at Seoul's Dongguk University, said North Korea's priority is rebuilding its frail economy in the new year and Pyongyang will try to improve international relations to get help.

"The most notable part this year is its commitment to the economy," he said, "In the past, it talked a lot about leader Kim Jong-il and the military-first policy, but here it seems to say it will restore its national system through its party and rebuild its economy."
Still, North Korea vowed its unwavering loyalty to leader Kim Jong-il amid rumors about his health. Kim went unseen in the public eye for more than 50 days until early October, and Seoul and Washington officials believe Kim had a stroke in August and is now recovering. Kim, turning 67 in February, has not nominated a successor.

"The glorious tradition of engraving an immortal heroic epic by dint of a harmonious whole in which the leader believes in the people and the people trust in and follow their leader absolutely should be inherited firmly," it said.

North Korea did not respond to the South's offer of dialogue. The editorial blamed Seoul for damaging inter-Korean relations.

"All the Korean people should resolutely check and foil the maneuvers of the anti-unification forces," it said, accusing Seoul of being "steeped in pro-U.S. sycophancy and hostility towards fellow countrymen."
Inter-Korean relations dipped to a record low during South Korean conservative President Lee Myung-bak's first year in office. Pyongyang suspended dialogue, and Seoul shipped no humanitarian aid to the impoverished North.

Seoul's Unification Ministry spokesman Kim Ho-nyoun said South Korea will continue to offer dialogue.

"The New Year mesage was the way we expected it," he said. "We call for a conversion of inter-Korean relations. We will continue our efforts to resume inter-Korean talks."
hkim@yna.co.kr
(END)


Durable product sales plunge in Nov. amid economic downturn

SEOUL, Jan. 1 (Yonhap) -- South Korean households and companies are scaling down spending on durable goods as concerns are growing that the economy is slowing at a faster-than-expected pace, the government said Thursday.

According to the National Statistical Office (NSO), durable product sales plunged 16.3 percent in November from a year earlier. Durable goods refer to high-priced products such as cars, computers and other equipment that can be used for more than a year.

The sharp decline stemmed mostly from a drop in vehicle sales. Car sales in November dived 39.4 percent from a year earlier, the NSO said. Consumers tend to reduce their spending on expensive goods when the economy is faltering, an NSO official said.

South Korea is currently struggling to maintain growth in the face of deepening worldwide recession woes.

The government predicts the economy to grow some 3 percent this year but some private think tanks say that the Asian export-driven economy could contract for the first time in 11 years.

In his New Year message, Finance Minister Kang Man-soo said that the economy is faced with an "unprecedented" crisis, predicting that growth would be "tough" to maintain until the first half of this year.

kokobj@yna.co.kr


Gov't to spend 87 bln won to support corporate relocation in 2009

SEOUL, Jan. 1 (Yonhap) -- The government said Thursday that it has set aside 87.0 billion won (US$66.4 million) this year to support balanced national growth by helping companies relocate their operations to rural areas.

The amount is double the 43.4 billion won used last year, with more funds to be used to purchase land and hire new workers, the Ministry of Knowledge Economy said.

Relocating companies out of Seoul, Incheon and the surrounding Gyeonggi Province has been an important policy move by recent South Korean administrations. The capital city and the surrounding region accounts for the bulk of the country's economic activities and wealth. This concentration has left provinces relatively underdeveloped and hurt national cohesiveness.

The ministry said it will support 70-80 percent of land acquisition costs for companies that relocate, up from a maximum of 50 percent in the past. In addition, the total that can be provided to each company will be raised to 6 billion won from 5 billion won at present.

It also plans to give 600,000 won of wage support to every new full-time worker employed, up from 500,000 won at present, with additional money to go to vocational training programs for up to six months.

In addition, the extra funds will permit 7 billion won to go companies that have invested more than 100 billion won into factories within four years of relocation and employ more than 300 people.

The ministry in charge of the country's industrial policies, meanwhile, said the percentage of funds provided by the central government will go up vis-a-vis regional administrations that usually do not have enough reserves to offer the kind of support needed by companies.

In the past, the central government paid half of the total support, with the rest coming from regional administrations that were hard-pressed to come up with matching funds.


Gov't to spend 100 bln won on overseas marketing in H1 to buoy exports

By Lee Joon-seung
SEOUL, Jan. 1 (Yonhap) -- The government said Thursday it will spend 100 billion won (US$76.3 million) on overseas marketing support efforts until June to help boost South Korean exports.

The amount represents more than 70 percent of the 140 billion won in state funds earmarked for export marketing support in 2009 and reflects the need to help companies attract more buyers in the face of the current global economic slump, the Ministry of Knowledge Economy said.

Most of the money to be used in the first half will come from the ministry and the state-run Korea Trade-Investment Promotion Agency (KOTRA), with the Small and Medium Business Administration and regional administrations providing additional support.

Seoul said that it wants to ship out $450 billion worth of goods this year, up from around $420 billion in 2008, with the country's trade surplus to hit $10 billion. The target reflects the best possible outcome, with most think tanks and government policymakers predicting zero or negative export growth in the new year.

"Studies have shown that 70-80 percent of all transactions are arranged during trade fairs, gatherings of importers and road shows that help connect sellers and prospective buyers," a ministry official said.

He said Seoul plans to support participation of local companies at foreign trade fairs and host large exhibitions that bring in more than 1,000 buyers.

The ministry, meanwhile, said it is planning to develop "customized" support plans that can assist local companies in expanding their market share in key overseas markets.

It said local companies must be geared to take full advantage of economic policy initiatives that will be implemented in the United States and the European Union.

Efforts must be made to use the appreciation of the Chinese yuan to sell more products to the rapidly developing economy and use the weak Korean won to reduce South Korea's chronic trade deficit with Japan that surpassed $30 billion last year, the ministry said.