After the September debacle on Wall Street, the global financial crisis put Korea's output, exports and consumption into a downward spiral in November, and sapped jobs in December, according to data from the Ministry of Strategy and Finance, the National Statistical Office and the Bank of Korea.
The data showed that production in the mining and manufacturing industries contracted 14.1 percent in November from a year ago, the worst since the government began compiling such data in 1970. The indicator first swung into the red in October with a 2.3 percent contraction.
The decline of the two monthly figures was steeper than a 0.4 percent contraction in December 1997 and a 7.7 percent contraction in January 1998.
Industry watchers attribute the quick contraction to worse-than-expected exports.
Exports, the main pillar of the Korean economy, dropped 19.5 percent in November and further plummeted an estimated 30 percent in the first 20 days of January.
According to the Korea Customs Service, local firms shipped an estimated $12.47 billion worth of goods during the first 20 days of this month, compared with $17.54 billion a year earlier.
Factories operated at just 68 percent of their capacity in November, compared with 80.6 percent a year ago, government data showed. It was the lowest level since 65.7 percent in August 1998.
As production of consumer goods decreased, consumption fell to the worst level in more than a decade. The November sales of consumer goods shrank 5.9 percent, the lowest since minus 7.3 percent in December 1998.
The weak exports and domestic demand created in a vicious circle, leading to output cuts and restructuring.
The economy lost 12,000 jobs in December from a year earlier, the first such decline in five years. The employment rate for those in their 20s stood at 57.8 percent in December, the lowest since May 1999, according to the NSO.
No bright spots in almost all economic indicators led the nation to suffer the worst fourth quarter GDP contraction in 11 years. The economy shrank 3.4 percent in the October-December period from a year earlier.
Many firms are forecast to suffer downgrades in their credit ratings, other industry data showed.
According to the credit rating agency Korea Investors Service, 283 Korean firms' annual rating drift rates, or upgrade rates minus downgrade rates divided by the total, swung into the red last year for the first time since minus 51.92 percent recorded in 1998.
The upward trend in credit ratings of Korean firms, which has been continuing since 1999, is now over due to increased credit risks from the last year's financial market distress, credit crunch and the deterioration in the real estate industry, a KIS official said.
Consequently, more than 20 percent of 481 corporate bonds as of Monday last week received BB or lower ratings, because the redemption of those bonds were deemed as somewhat speculative to be guaranteed in the long term, KIS said.
Ssangyong Motors and C&Heavy Industries have been excluded from the ratings evaluation since the two were rated D, or in default. Ssangyong, the Korean unit of Sanghai Automotive Industry Corp. of China has asked court receivership and creditor banks decided to cut off rescue loans to C& Heavy earlier this month. ◦
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