Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
New president likely to see sluggish facility investment in 1st year in office
A view of Cheong Wa Dae / Korea Times file
By Yi Whan-woo
By Yi Whan-woo
The new president is likely to witness sluggish growth in facility investments nationwide during his first year in office, studies showed.
The studies attributed the decline due to businesses' caution while waiting to see the new administration's policy for their respective sectors before finalizing any investments.
In his thesis, Pusan National University professor Kim Young-duk referred to cases shortly before and after presidential elections in the past and noted that facility investments during the period “have been on a downward trend.”
“The businesses do not want to take risks at a time when it is uncertain whether the government's policy will change significantly from its predecessors,” the thesis read.
For instance, the shift in the energy paradigm away from nuclear energy under the Moon Jae-in administration has been heavily affecting Doosan Heavy Industries and Construction, the country's leading nuclear power plant builder, for the past five years.
A separate study released Monday by the Korea Development Institute (KDI) showed that facility investments already slowed down between December last year and January this year. The total volume of facility investments in January dropped by 6 percentage points from the previous month even though the presidential election was still two months away.
Analysts generally expect facility investments will bounce back in the second and third years of a president's term.
They referred to growth trends between 1988 and 2021, when the facility investments grew on average by 3.75 percent during the first years of presidential terms, 5.71 percent in the second years and 6.38 percent in the third years. The growth rate averaged 4.94 percent in the fourth years and 5.38 percent in the fifth years.