GLOOMY 2023 OUTLOOK FOR LOCAL INDUSTRIES

[Anchor Lead]

Despite the high inflation, high-interest rate, and high foreign currency exchange rates, the South Korean economy saw an increase in all production, consumption and investment last year. Although, it's posted an increase for two consecutive years, prospects aren't looking so bright this year. Let's take a look.

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This man signed a deal to purchase a car late last year. He was told he had to wait until October to receive the car, but was notified a month later that he could get the car delivered this summer at the earliest.

[Soundbite] (Customer waiting for a new car) : "They told me the car financing interest rate will keep rising, causing a few deals to be canceled which shortened the waiting period."

One model that had a waiting time of up to 30 months can now be shipped off in a year. Delivery of major vehicle models is speeding up this year. While some attribute this phenomenon to eased supply of semiconductors, most experts believe high car financing interest rates leading to cancellations is the key contributing factor.

[Soundbite] Lee Hang-koo(Korea Automotive Technology Institute) : "Consumers’ real purchasing power has declined and the average sales price of automobiles reached record highs, making it harder to create new demand."

The semiconductor industry, another pillar of Korea's industrial production, is already in dire straits. Samsung Electronics‘ fourth quarter operating profit in the semiconductor business barely avoided a deficit. SK Hynix, already in the red, decided to cut its investment. These factors caused industrial production, which had kept shrinking since the second half of 2022, to show a modest rebound in November before falling again.
Facility investment also plunged by more than 7% in December. To make matters worse, consumer spending, which has driven the Korean economy so far, is bound to stagnate again this year as interest rates continue to soar.

[Soundbite] Joo Won(Hyundai Research Institute) : "Consumer purchasing power has weakened and investments delayed, which could worsen the recession in the local market."

Although the government is well aware of these difficulties, it hasn't come up with effective pump-priming measures except for early fiscal budget execution in fear of sparking further inflation.