[KIMT ⑭] Korea's Machine Tool Export Forecast

Exports Expected to Reach US$2.5 Bil in 2014

In 2014, Korea's machine tool exports are expected to grow 13.1% year-on-year to US$2.5 billion. The double-digit growth projection has the potential to be realized owing to a 3%-level growth of the global economy, continuation of economic recoveries in the Unites States and eurozone and recovery of exports to BRICs, which were more or less sluggish in 2013. Strengthened exploration of overseas markets and utilization of already-concluded FTAs by domestic enterprises and the possibility of concluding a Korea-China FTA also are likely to serve as positive export growth factors.

In addition, favorable conditions for increased demand also include expanded overseas production by domestic carmakers, such as production at the third plant in China, full-fledged local production in Brazil and plant facility expansion in Turkey by Hyundai Motor and Kia Motors.

Amid this environment, the domestic machine tool industry is expected to stage active overseas marketing activities in 2014 with a focus on leading overseas machine tool exhibitions in India, China, Germany, Italy, Turkey, Japan, etc.

On the other hand, a slower recovery of the global economy, possibility of the U.S. tapering of quantitative easing, unrest in financial markets in emerging countries and uncertain economic vitality in developing countries as well as a continuation of China's investment adjustment have the potential to be stumbling blocks.

In the midst of a mid-7% level of low growth projected due to China's restructuring going into full swing, the possibility of a financial crisis in some South and Southeast Asian countries, including India and Indonesia, may be the largest variable.

In 2014, Korea's machine tool exports may near the record-high results of 2012 (US$2.55 billion) but it will be hard to set a new record. Meanwhile, fierce competition is expected in the global machine tool market in 2014 due to continuation of Korean won currency appreciation and Japanese yen depreciation, expanded overseas production of low-priced machine tools and strategic alliances between the world's machine tool manufacturers.

[KMTI ➀] Korean Economic Forecast 2014

Korean Economy is Expected to Grow 3.8% in 2014

The Korean economy is expected to post a year-on-year rate of growth of 3.8% in 2014 compared with 2.8% growth in 2013, the Bank of Korea(BoK) announced on Jan9.

The economic recovery is anticipated to continue, with domestic demand including consumption and investment improving and the export momentum being maintained.
Looking at the sectoral contributions to growth on the expenditure side, those of domestic demand (1.8%p) and of exports (2.0%p) will be generally similar.
The rate of growth of gross domestic income (GDI) (4.8%) will exceed that of GDP (3.8%) in 2014, as in 2013, due to improvements in the terms of trade as a result of unit import price stability owing for example to the decline in international oil prices.
The 2013 and 2014 GDP growth forecasts (2.8%, 3.8%) remain unchanged from those drawn up in October 2013, as positive factors such as updates reflecting the actual performance figures and the downward adjustments of international commodity prices, and negative factors including the weakening of the yen offset each other.
The ratio of the current account surplus to GDP is projected to fall from 5.7~5.8 percent in 2013 to4.1~4.2 percent in 2014, and then to 3.1~3.2 percent in 2015.
The current account surplus is forecast to stand at 55.0 billion dollars in 2014, larger than the October 2013 forecast.
In terms of the future growth path, the risks are assessed as neutral, as downside risks including global financial market unrest following QE tapering, the possibility of heightened volatility of the yen, and North-Korea related geopolitical risks, and upside risks such as growth trend accelerations in the US and EU are seen as likely to balance each other out.
As for the price path, there are both upside risks, such as a jump in agricultural product prices caused by bad weather conditions, and downside risks including declines in international commodity prices due to a slowing of the global economic recovery, but taken as a whole the risks are appraised as neutral.