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Economy likely to rebound 1st half on expected chip industry
By Lee Kyung-min
Industrial output grew at its slowest pace in 19 years in 2019, driven by a worse-than-expected slowdown in both construction and facility investment amid the U.S.-China trade feud, data showed Friday.
Experts, however, said the economy will see a substantial V-shaped rebound in 2020 mostly due to an expected recovery in the semiconductor industry that accounts for about a fifth of the exports of Asia's fourth-largest economy.
But lingering uncertainties over the trade feud and a fresh health scare ― the fast-spreading coronavirus ― remain major downside risks to the country, they noted.
Statistics Korea data showed overall industrial output grew 0.4 percent last year from 2018, the lowest growth since the agency began compiling related data in 2000.
Production in mining slid 0.7 percent from the previous year due to a decrease in demand for raw materials needed for electronic goods manufacturing and subsequent fall in related facility investments.
Manufacturing capacity fell 1.2 percent from a year earlier, extending its year-on-year drop for second consecutive years.
The agency said 2018 and 2019 were the only two years that saw production capacity fall since 1971, adding this was an inevitable result after the once-booming shipbuilding industries began to collapse in 2016, compounded by the ongoing, drawn-out U.S.-China trade feud.
Facility investment saw a 7.6 percent drop from a year earlier, the steepest fall since 2009, mostly due to a lack of equipment replacement.
Construction dipped 6.7 percent from the year before, the steepest drop since 2008.
Retail saw a 2.4 percent year-on-year jump, following increases in the sales of automobiles and cosmetics.
From a month earlier, however, overall output gained 1.4 percent in December, backed by increases in production, consumption and investment, extending a rise for the second consecutive month.
Manufacturing output rose 4.5 percent from the month before.
Semiconductor reported a 0.2 percent month-on-month production increase, rising for the third consecutive month, after exports rose 14.7 percent from the month before.
"Samsung Electronics and SK Hynix Soon are expected to make facility investments," a statistics agency official said.
The agency said it would continue monitoring whether the fast-spreading coronavirus would have a noticeable impact on the manufacturing sector, in response to the seventh confirmed case of the new coronavirus here.
"The fallout from a similar previous health scare involving severe acute respiratory syndrome (SARS) was limited to the services sector. We will have to closely watch how contagious the virus becomes," a statistics agency official said.
However, Loyola Marymount University finance and economics professor Sohn Sung-won viewed otherwise.
"The SARS episode was concentrated around Beijing where manufacturing is limited," he said. "However, the coronavirus scare is concentrated around manufacturing centers. This time its economic impact could be more serious, especially on manufacturing and exports."
Experts said the economy will be able to see a substantial rebound on the back of the earlier-than-expected recovery in the semiconductor industry.
"Demand for dynamic random-access memory (DRAM) memory chips and NAND flash will substantially grow on the expected spike in demand for fifth-generation (5G) telecommunications technology," Yonsei University economist Sung tae-yoon said.
"But this is not a foregone conclusion following the outbreak of the new coronavirus in China, accounting for over half of global demand. If domestic consumption there weakens, continued subdued demand is inevitable, but if the virus is contained sooner than previously thought, the impact will be limited."
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