It will get worse

Korea faces greater downside risk in 2nd half

The Korean economy will face greater downside risks in the second half of this year, with exporters having a harder time shipping goods overseas due to the prolonged European debt crisis and other external negatives, the Korea Chamber of Commerce and Industry (KCCI) said Tuesday.

The lobby group for 14,000 businesses nationwide also said the continued sluggish domestic consumption, as a result of surging household debts and the stagnant property market, will make it more difficult for companies to do business here.

According to the KCCI, the business environment both at home and abroad for local firms will likely deteriorate in the latter half of the year, citing three major downside risks ― a global economic downturn, rising utility bills and intensifying labor disputes ahead of the December presidential election.

By industry, the KCCI projected that the information technology and machinery sectors will enjoy brisk business for the remainder of the year, while automobile and semiconductor makers will face a cloudy outlook.

But due to the slowing Chinese economy and other unfavorable conditions, refiners and steelmakers will continue to struggle in the latter half.

Shipbuilders are expected to face worsening business conditions due to the eurozone crisis, with construction firms falling into a deeper slump amid the deteriorating real estate sector.

“Some industries will see business conditions improve, while others will struggle to stay afloat. But in general, things are not favorable for Korea Inc.,’’ a KCCI official said.

The official said the government should extend more financial and other support to struggling companies to help them more effectively deal with the eurozone crisis and the slowing global economy.

Sunny for IT, machinery

KCCI said the production of various information technology products will increase 3.3 percent in the second half of the year from the first half, with exports jumping 8.7 percent.

Global consumers are expected to buy more televisions ahead of this summer’s London Olympics. Smartphones and other hand-held devices made by local electronics firms will also be popular, the KCCI said.

The machinery sector will see exports rise 11.8 percent in the latter half on the back of rising demand from China, the United States and the Middle East.

Domestic carmakers are forecast to ship about 1.6 million vehicles to the U.S. and other foreign markets in the second half as global consumers continue to buy Korean cars.

The KCCI said output by the petrochemical industry will grow 12.1 percent in the latter half as LG Chem and other firms expand investments. The sector will likely secure larger orders from China and Southeast Asian countries.

But petrochemical firms will continue to grapple with stagnant business in the U.S. and Europe.

The textile industry will produce 2.9 percent more on growing demand from emerging economies in Southeast Asia, while semiconductor makers are expected to churn out 11.6 percent more products as the surging demand for smartphones will require more chips.

The continued shrinking global orders for oil products, coupled with high crude prices, are expected to deal a blow to local refiners in the second half.

The KCCI also said steelmakers will continue to wrestle with falling demand for steel products from struggling shipbuilders and construction firms.

Bleak outlook for shipbuilding, construction

Due to the continued turmoil in Europe, the local shipbuilding industry will unlikely pick up any time soon, the KCCI said.

Orders secured by local shipbuilders are expected to fall about 28 percent in the second half from the first as the shipping industry continues to struggle with the shrinking global trade.

The situation is not much different for the construction industry.

The KCCI projected that construction orders will decline 3.9 percent in the latter half as the government frontloaded most budgets in the first six months.

Despite a series of deregulations designed to prop up the near-death real estate sector, the KCCI said they are not enough to revive struggling builders due to record-high household debt and other unfavorable market conditions. <The Korea Times/Lee Hyo-sik>

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