hankyoreh

Sept. 14.

Yesterday marks one year since the beginning of the global financial crisis that began last Sept. 15 with the collapse of Lehman Brothers. The KOSPI index is steadily climbing towards 2000 again, and the exchange rate between the Won and the dollar has recovered a trend of stability. South Korea’s foreign reserve stores have also fattened up once again. The South Korean government is now bickering with the Bank of Korea over the timing of an exit strategy, including a possible increase in the interest rate, for reining in the funds released during the crisis. Compared to a year ago, these are nice worries to have. The big fire is out. It is too early, however, to conclude that the embers have been fully extinguished.

Various macro-indicators and financial indicators for South Korea’s economy over the past year have shown a V-shaped recovery, characterized by a sharp drop followed by a more or less equally sharp rise.

The real gross domestic product (GDP) fell as much as 5.1 percent in the fourth quarter of last year when the crisis first broke, but rose again by 2.6 percent in the second quarter of 2009. Manufacturing production figures had been negative since October 2008, diving as low as -25.5 percent in January, but in July they finally turned positive and have resulted in a 0.7 percent increase over last year. Although, facilities investment and consumer expenditures remain inactive at -18.2 percent and -1.6 percent respectively compared to last year.

The KOSPI index had plummeted to 938.75 as of Oct. 24, 2008, but as of last Friday it was back up to 1,651.70. The Won to dollar exchange rate as well, which in last year early September was hovering around 1,000 Won to 1 dollar, went through several steep rises after the crisis broke out, reaching as high as 1,573.6 on March 3 during the so-called “March crisis.” Recently, however, the exchange rate had hovered around 1,200s. This is still higher than pre-crisis levels, but it has definitely escaped speculation of a possible national bankruptcy.

There is one economic group that has been able to seize the opportunity the crisis represents. Big exporters in areas like semiconductors and automobiles have occupied a larger share of the global market during the past year thanks to the high Won-to-dollar exchange rate, and their results have shown improvement from pre-crisis levels.

In the fourth quarter of 2008, Samsung Electronics registered a 740 billion Won deficit, but its 2.52 trillion Won profit in the second quarter of 2009 fired a signal flare indicating that it had busted out of its slump. Observers are now expecting that its third quarter profits will be in the neighborhood of 4 trillion Won. In addition, while global carmakers are still gasping for breath, Hyundai and Kia are flying high away from the pack. By using aggressive marketing tactics and focusing on smaller cars, which are more resistant to recession, these two companies brought their share of the U.S. auto market up from 5.3 percent in Aug. 2008 to 8.0 percent in Aug. 2009. “Thanks to the rising exchange rate, domestic companies became more competitively priced, and when product competitiveness was added, the share of the global market increased,” said An Seong-ho, an analyst with KB Investment and Securities. “They were able to make good use of the opportunity the financial crisis presented,” An commented.

Meanwhile, the disparity between large and smaller companies continues to widen. Small- to mid-size businesses dodged a bullet earlier this year thanks to various emergency measures from the government, including the extension of loan repayment deadlines, fast track assistance and 100 percent loan guarantees, but they have yet to fully regain their strength. A comparison of manufacturing industry production figures last July by scale of business showed a 4.5 percent increase from the same period in 2008 for large companies, but an 8.1 percent drop for small- to mid-size businesses. Default rates on bank loans for small- to mid-size businesses have continued to deteriorate following the crisis, rising up to 2.10 percent last month.

Please direct questions or comments to [englishhani@hani.co.kr]