The korean advertising yearbook 2009


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“The Korean Advertising Yearbook 2009” covers the latest consumer and marketing trends in South Korea. This publication has been praised for its insightful analyses coming from the extensive research done by industry experts in Korea; however, these values have not previously been available to the wider readers as the book was published in Korean only. We are pleased to announce that it is now available in English, and available in an easy-to-get digital format. It is believed that the book will be valuable for those interested in learning the latest marketing & advertising trends, and the consumer trends in Korea.

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The korean advertising yearbook 2009

  1. 1. The Korean Advertising Yearbook 2009 XenoOneNOTICE: Proprietary and Confidential. All content included in this material, such as text, graphics, logos, tables, graphs, and images, is the property of XenoOne or its content suppliers and protected by international copyright laws. You agree not tocopy, reproduce, duplicate, sell, resell, or exploit for any commercial purposes, any portion of this material. You may not re-use and/or extract part of the content of this material without XenoOne’s express consent in writing. ©2010 XenoOne Co.,Ltd. ©All Rights Reserved.
  2. 2. The KoreanAdvertising Yearbook2009 Table of Contents Overview of Economy 4 Analysis on Advertising Spending 15 Trends in the Advertising Industry 33 Marketing Trends 48 Branding Trends 55 Television and Radio 63 Newspapers 76 Magazines 86 Cable TV 94 Sales Promotion 106 Outdoor Advertising 111 Event 118 Space Marketing 123 Internet 127 Public Relations 137 Sports Marketing 146 Culture Marketing 152 Advertising-related Companies 162 Advertising-related Organizations 230 Appendix. Koreas Advertising Related Statistics 235 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  3. 3. The Korean Advertising Yearbook 2009 Part1. Advertising Market Overview ● Overview of Economy 004 ● Analysis on Advertising Spending 015 ● Trends in the Advertising Industry 033 ● Marketing Trends 048 ● Branding Trends 055 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  4. 4. Economic Survey Overview of Economy● ● By Jaesoo Bae / Economic Activity Analysis Team Leader Research Bureau, The Bank of Korea The Gross Domestic Product (GDP) in South Korea expanded only at an annual rate of 2.2 percent in 2008. The growth rate was the lowest since 1997 Asian financial crisis or Korea’s foreign cur- rency crisis. This lowest rate was caused by reduced domestic demand whereas export growth showed a decline. Consumer prices showed an average increase of 4.7 percent. The price increase was influenced by a surge in international commodity prices and a depreciation of Korean won. The current account registered a deficit of 6.4 billion dollars for the first time since 1997. The financial markets showed highly unstable movements: interest rates fluctuated sharply, stock prices plunged, and won/dollar exchange rate soared. Overview the won-dollar exchange rates. The current account registered 6.4 billion dollars deficit for the first time The Korean economy experienced difficulties in 2008. since 1997, as deficits continued in the services sector Economic growth abruptly slowed, as the prices and the previous surplus of trade balance dwindled accelerated sharply and the current account balance sharply due to the surge in international oil prices (see shifted to a deficit. All these downturn trends were Figure 1). directly related to the impact of the global financial In the financial markets, interest rates fluctuated crisis, a subsequent slowdown of the world economy, conspicuously in the wake of the global financial crisis, and a surge in international commodity prices. The stock prices plunged and the won-dollar exchange rates financial markets, similarly, showed highly unstable soared. These were all influenced by a synchronized movements. downturn of the global stock markets and an outflow of As for the real economy, domestic demand slowed due foreign investment funds. to a deteriorated economy at home and abroad as well There are major worries that in 2009 the Korean as a decrease of personal income. The export growth economy will record a negative growth rate because of also weakened due to overseas reduced demand, the deepening sluggishness of domestic demand under consequently the GDP growth stood only at 2.2 percent the influence of the global economic downturn. The which is the lowest since Korea’s foreign currency upward trend of prices is expected to decelerate due to crisis. Consumer prices rose 4.7 percent owing to a eased demand pressure and declining international surge in international commodity prices and the rise of commodity prices, while the current account is likely to register a surplus in 2009 as the decrease of imports (Figure 1) Major economic indicators Current Account (right scale) outstrips that of exports. It is feared that in the GDP Growth Rate (left scale) (%) Consumer Price Inflation (left scale) (billion U.S. dollars) financial markets, the financial intermediation will be 20 50 inactive due to an economic slowdown and a persistent 16 40 unrest of the global financial markets. 12 30 8 20 4 10 Global Economic Trends 0 0 -4 -10 During 2008, the world economy slowed as the global -8 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -20 financial turmoil spread to the real economy. The * Source: Bank of Korea, Statistics Korea advanced economies experienced a synchronized 4 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  5. 5. ● Overview of Economy downturn and, in the latter half of the year, growth in In the international financial markets, following most newly emerging market economies fell back Lehman Brothers’ application for bankruptcy protection markedly. Accordingly, the growth rate of the global in mid-September, credit crunch deepened further and economy in 2008 slowed from 5.2 percent in 2007 to 3 tendencies toward a preference for safe haven assets percent. U.S. economic growth dropped 1.1 percent due and securing liquidity strengthened. As a result, stock to a persistent downturn in the housing market and a prices plunged in the developed countries, spreads on worsening credit crunch. The annual growth of the corporate bonds surged, and financial institutions’ Eurozone economy registered a negative growth from lending activity cooled rapidly. As financial institutions the second quarter, exhibiting a growth rate of 0.9 in advanced nations aggressively withdrew investment percent. The Japanese economy experienced a funds on a large scale, the currencies of newly negative growth of 0.6 percent as its export growth emerging market countries softened abruptly as a slowed and slow facilities investment further result of a shortage of foreign currency liquidity and deepened, due to global business downturn and yen some of the countries faced a financial crisis. strength. The Chinese economy kept up a relatively International oil prices (Dubai, spot basis) soared to a favorable growth rate of over 10 percent in the first record high of 141 dollars per barrel in mid-July. half, but it slowed down sharply in the latter half, However, the price plummeted to 37 dollars at the year- owing to lackluster exports. It posted a growth rate of end due to a reduced demand in the wake of the 9.0 percent for the year as a whole. The economies of economic slump in advanced countries, an outflow of Southeast Asian and Latin American countries saw speculative funds from the commodity markets, and a their growth rates decelerate in the latter half of 2008. stronger U.S. dollar. The prices of other commodities The deceleration was influenced by outflows of foreign marked a steep overall fall from August (see Table 1). funds and reduced exports in the wake of the financial crisis and the economic downturn in advanced countries. (Table 1) Major global economic indicators (Unit: %) Year 2004 2005 2006 2007 2008 Economic Growth World1) 4.9 4.5 5.1 5.2 3.2 Advanced Countries1) 3.2 2.6 3.0 2.7 0.9 United States 3.6 2.9 2.8 2.0 1.1 Eurozone 2.1 1.7 2.9 2.7 0.9 Japan 2.7 1.9 2.0 2.4 -0.6 Newly Emerging Market Countries1) 7.5 7.1 7.9 8.3 6.1 Asia1) 8.6 9.0 9.9 10.6 7.7 (China) 10.1 10.4 11.6 13.0 9.0 Central and South America1) 6.1 4.7 5.5 5.7 4.6 Crude Oil Prices Increase Rate2) 25.2 47.8 24.4 11.0 37.6 (USD/barrel) (33.5) (49.4) (61.5) (68.3) (94.0) Other Commodity Prices Increase Rate3) 15.2 6.1 23.2 14.1 7.4 Long-term Interest Rates4)Notes: (United States) 4.22 4.39 4.70 4.02 2.211) Based on figures published by IMF (April 2009) (Japan) 1.44 1.48 1.69 1.51 1.172) Dubai spot price, annual average3) Non-fuel primary commodities index (IMF), Short-term Interest Rates annual average (United States)5) 2.21 4.07 5.01 3.24 0.084) Yield on 10-year Treasury notes, at the year-end5) Yield on 10-year Treasury notes, at the year-end (Japan)5) 0.00 0.00 0.45 0.56 0.206) 3-month maturity dollar LIBOR, at the year-end (Eurodollar Interest Rates)6) 2.56 4.54 5.36 4.70 1.437) Closing price on the Tokyo market, at the year-end8) Reuters notice price JPY / USD7) 103.8 117.5 118.8 113.0 90.2 USD / Euro8) 1.356 1.184 1.320 1.459 1.398* Source: IMF, Reuters, and Bloomberg 5 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  6. 6. ● Overview of Economy Trends in Real Economy owing to a deterioration in corporate profitability, dampened investment spirits and a housing market In 2008, the GDP growth rate of the Korean economy slump in the wake of the worsened economic environ- registered 2.2 percent, the lowest since the foreign ment at home and abroad. Facilities investment currency crisis. The GDP growth decline was influenced decreased by 2.0 percent as investment in machinery by lackluster domestic demand and a slowdown in shifted to a decline because of weakness of the exports. semiconductor business. Transport equipment Examining each quarter, in the first quarter GDP investment was sluggish, led by the automobile registered a 1.1 percent increase which is lower than industry. Construction investment decreased by 2.1 1.3 percent of the preceding quarter. This was percent due to a sharp drop in buildings for residential attributed to the listless investment by companies. The use which served to offset a slight increase in civil growth rate slowed further to 0.4 percent in the second construction centering on the government sector (see quarter as investment continued in the doldrums while Figure 2). private consumption began to decline. It then slipped Exports of goods and services (in real terms) saw their again to 0.2 percent in the third quarter due to the growth rate decrease from 12.6 percent in the export decrease. In the fourth quarter, it plummeted to preceding year to 5.7 percent, as the growth rate was -5.1 percent, the biggest fall since the foreign currency affected due to the deterioration of the global economy. crisis in 1997-98, as both exports and domestic sales Most strikingly, in the fourth quarter, exports dropped shrank sharply following the Lehman Brothers’ by 8.9 percent and marked the biggest plunge since the bankruptcy filing in mid-September. The year-on-year first oil crisis in 1974. Imports (real terms) similarly saw growth rate, meanwhile, decelerated progressively their growth rate decrease from 11.7 percent in the from 5.5 percent in the first quarter to -3.4 percent in preceding year to 3.7 percent and that growth rate was the fourth quarter. influenced by lackluster domestic sales and slower When looked at by component of demand, final export growth. consumption expenditures increased by 1.6 percent, a Meanwhile, real gross national income (GNI) decreased steep fall from 5.1 percent in 2007. Private consump- by 0.8 percent, the first decline since the foreign tion remained weak owing to diminished real incomes currency crisis, as real trade losses expanded sharply and worsened employment situations. The growth of owing to a deterioration of trade terms following the government spending also decelerated somewhat from rise in international oil prices and a fall in semi- the preceding year owing to a reduced rate of increase conductor prices (see Table 2). in social security disbursements. Examining the distribution of national income (Nominal The rate of increase in fixed investment shifted from NI), the labor incomes distribution ratio edged down 2007’s positive 4.2 percent to a negative 1.7 percent from 2007’s 61.1 percent to 60.6 percent as the growth of compensation for employees lagged behind that of (Figure 2) Economic growth rate1) Domestic Demand (Consumption and Investment) businesses’ operating surpluses. (%) Exports GDP (%) 10 10 The gross savings ratio fell from 2007’s 30.8 percent to 30.7 percent as consumption increased sharply owing 5 5 to high inflation as against a slight increase in incomes following the economic slowdown. The gross domestic 0 0 investment ratio rose from 29.5 percent to 31.2 percent as the slow increase in incomes was outstripped by -5 -5 accelerated investment in response to a surge in prices of capital goods. -10 -10 Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ 2005 2006 2007 2008 Looking at the trend of production activities by sector during the year, both manufacturing and services Note: 1) Compared to the previous quarter * Source: “National Accounts” BOK registered growth rates only about half of 2007 while 6 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  7. 7. ● Overview of Economy (Table 2) Domestic economic indicators (Unit: %) 2008 2006 2007 Annual Ⅰ Ⅱ Ⅲ Ⅳ 1) GDP 5.2 5.1 2.2 1.1( 5.5) 0.4( 4.3) 0.2( 3.1) -5.1( -3.4) Final Consumption 5.1 5.1 1.6 1.1( 3.9) 0.2( 2.6) 0.2( 2.0) -3.4( -1.9) (Private) 4.7 5.1 0.9 1.1( 4.0) -0.2( 2.3) 0.0( 1.4) -4.6( -3.7) (Government) 6.6 5.4 4.2 1.2( 3.6) 1.4( 4.0) 1.1( 4.5) 1.0( 4.7) Fixed Investment 3.4 4.2 -1.7 -1.6(-0.5) 0.1( 0.6) 0.1( 1.8) -6.5( -7.3) (Construction) 0.5 1.4 -2.1 -2.5(-1.9) -0.3(-0.3) 0.1( 0.2) -3.0( -5.6) (Facilities) 8.2 9.3 -2.0 -0.4( 1.5) 0.4( 1.1) 0.2( 4.3) -14.2(-14.0) Exports 11.4 12.6 5.7 0.0(11.0) 2.7(11.5) -0.4( 9.3) -8.9( -6.9) Imports 11.3 11.7 3.7 -0.8( 9.7) 2.9( 8.9) 1.1( 9.0) -14.2(-11.2) GNI1) 3.9 4.8 -0.8 -1.0( 3.3) 0.9( 2.3) -3.6(-2.7) -1.6( -5.4) Unemployment Rate2) 3.5 3.2 3.2 3.1(3.4) 3.2(3.1) 3.2(3.1) 3.2(3.1) Consumer Prices1) 2.2 2.5 4.7 1.3(3.8) 2.0(4.8) 1.4(5.5) -0.3(4.5) Core Inflation1) 1.8 2.4 4.2 1.4(3.0) 1.8(3.9) 1.2(4.8) 0.9(5.4) Current Account(100 million $) 53.9 58.8 -64.1 -52.1 -1.3 -85.8 75.2Notes: Exports(customs clearance basis)1) 14.4 14.1 13.6 (17.4) (23.1) (27.0) (-9.9)1) The rate of growth compared to the previous quarter. Imports(ditto)1) 18.4 15.3 22.0 (28.9) (30.5) (42.8) (-9.0) The figures in parenthesis are year-on-year rates.2) The figures in parenthesis are not seasonally adjusted. Yields on 3-year Treasury Bonds3) 4.83 5.23 5.27 5.22 5.32 5.85 4.683) Average during the period Yield on 3-year Corporate Bonds3),4) 5.17 5.70 7.02 6.35 6.27 7.19 8.294) AA- degree basis KOSPI (end of period) 1,434.5 1,897.1 1,124.5 1,704.0 1,674.9 1,448.1 1,124.5* Source: Bank of Korea “ECOS” KRW per USD (end of period) 929.8 936.1 1,259.5 990.4 1,046.0 1,207.0 1,259.5 construction growth rates shifted to a decline. actions. The growth of wholesale and retail trade, Manufacturing industry grew 3.1 percent and that was restaurants and hotels, as well as transport and a sharp decline from 7.2 percent in 2007. In particular, it storage business also slowed. This was attributed to decreased by 11.9 percent quarter-on-quarter in the dampened consumer confidence and a slowdown in fourth quarter, the biggest fall since records had begun. freight volume following the economic downturn. This reflected the spread of cuts in production in major The construction industry shifted from an increase of industries such as the semiconductor and automobile 2.6 percent in the preceding year to a decrease of 2.4 industries due to reduced domestic and international percent, showing a deepening slowdown. The private demand. By industry, electrical and electronic sector shifted to a decline, centering on construction of equipment registered only a single-digit increase in residential buildings, and the government sector production due to the depressed state of the continued to be sluggish owing to a steep fall in semiconductor business worldwide. The growth of construction of non-residential buildings. This served to machinery equipment, petroleum, coal and chemicals offset the slight increase in civil construction. also decelerated sharply, influenced by slowing Electricity, gas and water supply saw their growth demand both at home and abroad. However, transport accelerate from 3.8 percent in 2007 to 5.1 percent. equipment kept up its robust expansion because of the Favorable business in the electricity sector resulting steep rise in shipbuilding and that served to offset a from improvements in fuel efficiency provided for this decrease in automobile manufacturing. increase. The agriculture, forestry and fishing sector In the service industry, the growth rate eased from 5.1 also saw its growth go up from 4.0 percent in 2007 to percent in 2007 to 2.5 percent. In particular, it suffered 5.5 percent led by the buoyant cultivation subsector. a quarter-on-quarter decrease of 1.4 percent in the A look at the proportion of each industry in the GDP fourth quarter, the largest since the foreign currency (nominal) shows the manufacturing and service rose by crisis. Looking at various fields of the service industry, 0.8 percent and 0.3 percent respectively from the the growth of the finance and insurance industry previous year, to 28.1 percent and 60.3 percent. But decelerated sharply owing to lackluster stock trans- both construction & electricity and gas & water supply 7 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  8. 8. ● Overview of Economy fell by 0.4 percent, to 7.0 percent and 1.8 percent of participation of people in the younger and older age respectively. groups in economic activity. As for the employment situation, there was some The increase in wages (on the basis of regular workers) deterioration in the labor market conditions due to the slowed down from 5.6 percent in 2007 to 3.4 percent. reduced economic growth rate with decreasing By period, wages continued on a robust growth until employment opportunities and an increasing number of the second quarter, but rose by only 3.0 percent year- people in underemployment. on-year in the third quarter, their growth trend The number of persons employed during the year fell flattening out. In the fourth quarter, wages fell by 1.7 sharply from 280,000 in 2007 to 150,000 in 2008. percent year-on-year, the first quarterly decrease since Specifically in December, the number of employed the foreign currency crisis. Meanwhile, the rise in unit shifted to a year-on-year decline for the first time since labor costs (nonfarm-basis) registered 2.1 percent, October 2003. Accordingly, the employment rate higher than 2.0 percent in 2007, as labor productivity slightly decreased from 59.8 percent in 2007 to 59.5 growth slowed down more rapidly than the rise in percent in 2008. Meanwhile, the number of people in hourly nominal wages (see Figure 3). The consumer underemployment, such as part-time workers and price inflation rate reached 4.7 percent, far higher than persons willing to work reduced hours, increased 2007’s 2.5 percent. This was primarily attributable to sharply, showing deterioration in terms of employment cost factors including a surge in international quality. commodity prices and the Korean won’s depreciation Looking at the number of persons employed by industry, against the US dollar. the service sector decelerated sharply because of The movement of consumer prices for each period sluggish domestic demand, centering on the business shows that the inflation rate rose from 3.8 percent and personal service. Construction shifted to a decline year-on-year in the first quarter to 4.8 percent in the due to sluggish housing activity and manufacturing second quarter and further to 5.5 percent in the third employment shrank at a faster pace, affected by slow quarter which was affected by a surge in international exports. The agriculture, forestry and fishing industry commodity prices and oil prices in particular. The continued its structural downward trend, but a increasing trend slowed to 4.5 percent in the fourth decrease rate slowed from the previous year, thanks to quarter due mostly to a decline in international oil abundant crops and good harvests. prices, but the reduction in the speed of inflation was Despite the reduced tempo of increase in the number of limited by a sharp rise in the won/dollar exchange rate. persons employed, the unemployment rate maintained In terms of price rise by category, the prices of the same as 2007 at 3.2 percent owing to the low rate agricultural, livestock and marine products rose by 0.5 percent and that was lower than 2007’s rise of 1.9 (Figure 3) Increase in number of persons employed and rate of increase in wages1) percent. The slower growth was due to the fall in Increase in number of persons employed (left) Rate of increase in nominal wages (right) prices of agricultural products in response to bounteous (Ten thousand people) (%) crops and good harvests. Prices of industrial products 40 10 rose sharply from 2.0 percent in 2007 to 7.8 percent, as 8 prices of petroleum products soared and those of 30 6 processed foods and durable goods continued on their 20 4 upward trend. Charges for services, similarly increased by 3.7 percent which is more than 2007’s 2.9 percent 2 10 increase, were mostly affected by charges for private 0 services, including eating out. 0 -2 Core inflation, which excludes non-grain agricultural Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ 2006 2007 2008 products and petroleum-based fuels from the consumer Note: 1) As the statistics compilation method changed in 2008, the figures before 2007 use the time series of the previous method of compilation. price index, rose by 4.2 percent from 2007’s 2.4 percent. * Source: Statistics Korea, Ministry of Labor This was attributable to the Korean won’s depreciation 8 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  9. 9. ● Overview of Economy their movements by period mirrored that of housing (Figure 4) CPI increasing rate and core inflation rate1) (Compared to the same month in the previous year) prices (see Figure 4). (%) (%) 6 6 The current account registered a deficit of 6.4 billion CPI increasing rate 5 ↓ 5 dollars for the first time in 11 years since 1997 as the 2.5~3.5% 3.0±0.5% (Target range) (Target range) goods account surplus narrowed sharply, whereas the 4 ↓ ↓ 4 services account remained in the red. 3 3 Exports (customs clearance basis) increased by 13.6 2 2 percent to total 422.0 billion dollars, posting a double- ↑ 1 Core inflation rate 1 digit increase for the sixth straight year. By period, 0 0 exports rose 22.6 percent in the first three quarters, 2004 2005 2006 2007 2008 influenced by rising overseas demand for Korea’s Note 1) Excludes the prices of non-grain agricultural products and petroleum-based fuels (along with city gas) from the CPI. traditional main export items and a rise in the 2) The inflation target was set in terms of core inflation rate in 2004-2006 and the increasing rate of CPI in 2007-2009. * Source: Statistics Korea “Consumer Price Trends” international prices of those products. In the fourth quarter, however, exports shifted to a decline of 9.9 percent owing to the worsening of the global economy. (Figure 5) Exports/Imports and Current Account By item, most items apart from automobiles and Exports (left scale) semiconductors turned in an upbeat export perfor- Imports (left scale) Current Account (right scale) mance. (100 million U.S. dollars) (100 million U.S. dollars) Imports (customs clearance basis) accelerated their 1,400 1,200 growth from 15.3 percent in 2007 to 22.0 percent in 1,000 800 2008, registering 435.3 billion dollars. By period, 600 imports soared by 34.1 percent in the first three 400 200 quarters owing to a surge in the prices of international 0 150 100 raw materials, including crude oil, but shifted to a drop 50 of 9.0 percent in the fourth quarter, influenced by the 0 -50 change of international raw material prices due to a -100 Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ decline and sluggish domestic sales and exports. By 2005 2006 2007 2008 item, imports of raw materials such as crude oil and * Source: Korea International Trade Association, Korea Customs Service grain increased sharply because of the surge in their international prices, but those of durable consumer against the background of the persistent knock-on goods and capital goods exhibited a low rate of effects from the earlier steep rise in world commodity increase, affected by slow domestic demand. prices. Despite favorable export performance, goods account In the real estate market, housing prices rose by 3.1 surplus narrowed from 28.2 billion dollars in 2007 to percent from the end of 2007, the same rate of increase 6.0 billion dollars in 2008 because the rise in imports as 2007. By period, they increased by 1.4 percent in the greatly outstripped that of exports. The services first quarter and 2.1 percent in the second quarter over account deficit narrowed from 19.8 billion dollars to the end of the previous quarter. The increase was 16.7 billion dollars in response to an improved travel affected by urban redevelopment projects and and transportation account position. Meanwhile, expectations on easing housing-related regulations. As income account surplus widened from 1 billion dollars economic conditions both at home and abroad in 2007 to 5.1 billion dollars owing to a reduction in subsequently worsened rapidly, the increasing rate of external payments of interest and dividends. The deficit housing prices stood merely at 0.8 percent during the of current transfers account narrowed. third quarter which turned into a 1.2 percent decline in The capital account balance posted a deficit of 50.9 the fourth quarter. Housing rents rose by 1.7 percent, a billion dollars, its first deficit since 2001, owing to slower increase than 2007’s 2.6 percent. The pattern of large-scale capital outflows in the wake of the global 9 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  10. 10. ● Overview of Economy financial crisis. For the year to September, it recorded a concerns over inflation resulting from the hike in oil deficit of 9.1 billion dollars because of the outflow of prices and exchange rates. After fluctuating within a foreigners’ stock investment funds. In the fourth narrow range after July, long-term market interest rates quarter, the deficit snowballed to 41.8 billion dollars as showed a steep decline after the lowering of the policy foreign exchange banks repaid a large amount of their rate in October. Consequently, as of the end of 2008, short-term overseas borrowings due to a credit crunch secondary market yields on three-year treasury bonds on the heels of the Lehman Brothers panic. had fallen 2.33 percent from the end of 2007 to 3.41 As of the end of 2008, the foreign reserves holdings percent. amounted to 201.2 billion dollars, a decrease of 61 Reflecting these movements of market interest rates, billion dollars from the end of 2007, affected by the banks’ lending and deposit rates fell for a while earlier foreign exchange authorities’ expanded supply of in the year but then rose steadily. After the lowering of foreign currency liquidity. Gross external liabilities policy rate, however, they shifted to decrease again. decreased by 2.7 billion dollars throughout the year to Meanwhile, the spread between long-term and short- 380.5 billion dollars, mainly owing to short-term foreign term rates (secondary market yields on three-year debts, but their ratio to nominal GDP (dollar basis) rose treasury bonds versus those on 91-day CDs) widened from 36.5 percent at the end of 2007 to 41.0 percent. from -0.08 percent at the end of 2007 to -0.52 percent Meanwhile, net external assets, which represent gross at the end of 2008 as yields on treasury bonds fell external assets less gross external liabilities, decreas- faster than yields on CDs in the fourth quarter. Apart ed by 69.7 billion dollars during the year under review. from this, the corporate bond risk premium (secondary This caused the nation to shift to a net external debtor market yields on AA- grade three-year corporate bonds position for the first time since 1999, with net external versus those on three-year treasury bonds) soared by liabilities of 32.3 billion dollars (see Figure 5). 3.28 percent points as from the end of 2007 to stand at 4.31 percent points at the year-end, their highest since the foreign currency crisis, which was influenced by a Trends in the Finance and Foreign surge in credit risk as a result of the global financial Exchange Market turmoil. KOSPI fell from the beginning of the year on widened In the financial markets, interest rates experienced net selling by foreigners and the deterioration of the wide fluctuations owing to the global financial crisis business performance of major investment banks in the and a resultant outflow of foreign investment funds. wake of the subprime mortgage meltdown. From Share prices plummeted and the won/dollar exchange March, it shifted to an upward trend to post a high of rate soared. 1,888.9 on May 16, helped by a slight easing of the Short-term market interest rates were fairly stable international financial market turbulence. However, early in the year thanks to the smooth inflow of funds with a surge in oil prices followed by the collapse of into banks, but shifted to an upward trend in the latter Lehman Brothers, the international financial market half as the financial market nervousness deepened and turmoil intensified further, precipitating a sharp fall of the banks’ fund-raising situation worsened. From the KOSPI to the year’s lowest of 938.8 on October 24. October, the rates shifted to a steep fall as the Bank of Subsequently, it pulled out of its steep decline thanks Korea lowered its policy rate to cope with the global to major countries’ announcement of market stabili- financial crisis. As of the end of the year, secondary zation and economic stimulation measures along with market yields on 91-day CDs stood at 3.93 percent, the moderation of foreigners’ net selling. As a result, at down 1.89 percent points from the end of 2007. the end of 2008, KOSPI stood at 1,124.5, which was Long-term market interest rates showed a decline, 772.6 points lower than at the end of 2007, the biggest affected by worries over an economic downturn and yearly decline since the foreign currency crisis. The expectations of a cut in policy rate during February- KOSDAQ index showed similar movements to KOSPI, April, but swung to a rising trend in May due to great but the scale of its decline was relatively larger. The 10 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  11. 11. ● Overview of Economy the Korean won traded at 1,103.4 won per US dollar, (Figure 6) Major Market Interest Rates and Stock Price Index which represented a depreciation of 15.8 percent from (%) (1980.1.4 = 100) 7 2,200 2007’s figure (see Figure 7). KOSPI (right scale) 2,000 Throughout the year, the growth of deposit-taking by 6 banks accelerated sharply as saving deposits soared Yields on Treasury Bonds (left scale) 1,800 following the stock market slump and special sales of 5 1,600 products carrying high interest rates, which counter- Call Rate (left scale) 4 1,400 acted the effects of mildness in the rise in short-term 1,200 marketable deposits in line with the subdued issuance 3 Yields on CDs (left scale) of CDs. Meanwhile, the growth of deposit-taking by 1,000 asset management companies increased only slightly in 2 800 2006 2007 2008 view of sluggish sales of stock-type beneficiary * Source: Bank of Korea “ECOS” certificates, offsetting the effects of brisk sales of MMFs. The growth of banks’ lending accelerated somewhat as (Figure 7) KRW exchange rate lending to households swelled markedly in comparison (won) (won) to 2007, offsetting the reduced growth of corporate 1,800 1,800 lending. Lending to large enterprises increased sharply, 1,600 1,600 influenced by the rising demand for funds for M&A. On 1,400 1,400 the other hand, the growth of lending to small and medium enterprises slowed as banks tightened their 1,200 1,200 won/dollar 1) risk management. The growth of lending to households 1,000 ↓ 1,000 accelerated remarkably, led by housing finance loans, ↑ won/100yen 2) which shrugged off the effects of a shrinking housing 800 800 market, thanks to the demand for mid-term and 600 600 remaining balance payments for the purchase of 2006 2007 2008 Note previously-allocated apartments and to the 1) Based on closing price 2) Arbitrated rate of exchange released by Seoul Money Brokerage Services government’s steps to ease real estate regulations. The * Source: Bank of Korea “ECOS” share of household loans in banks’ total outstanding lending, nevertheless, fell back from 46.4 percent in KOSDAQ index stood at 332.1 at the year-end, 372.1 2007 to 43.8 percent on a year-end basis as their points lower than at the end of 2007 (see Figure 6). growth rate was outstripped by that of household The won/dollar exchange rate showed an upward trend credits. from March in response to a net outflow of foreign Corporate funding conditions showed a generally stock investment funds and a current account deficit. In deteriorated pattern as the growth of lending to small particular, the upward trend accelerated from mid- and medium-sized companies slowed sharply and September owing to the worsening global credit delinquency rates rose. In particular, a credit crunch crunch. It reached 1,513 won per dollar on Nov. 24, the emerged in the fourth quarter as the issuance of CPs highest rate since March 1998. Subsequently it shifted and corporate bonds by companies with low credit to a decrease, influenced by large-scale surplus of the ratings shrank sharply amid rising risk aversion in the current account, supply of currency swap funds from financial market. the U.S. Federal Reserve, and the authorities’ efforts to Looking at the movements of monetary aggregates, the stabilize foreign exchange market. As of the end of the growth rates of Lf, which indicates the liquidity of year, accordingly, it closed at 1,259.5 won per dollar, a financial institutions and of broad money M2 rose from depreciation of 25.7 percent against the U.S. dollar 2007’s 10.2 percent and 11.2 percent, to 11.9 percent from the end of 2007. On an annualized average basis, and 14.3 percent respectively. This was ascribable to 11 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  12. 12. ● Overview of Economy the faster growth of private credit following an Its consumption in 2009 will continue to grow thanks to increase in financial institutions’ lending, which offset vigorous national policies to stimulate domestic the effects of money absorption through the overseas demand, such as expansion of distribution networks in sector, resulting from the outflow of foreigners’ farm villages, extension of subsidy beneficiaries, and investment funds and the current account deficit. On exemption of income tax on interest. However, the the other hand, the growth rate of narrow money M1 growth rate is estimated to drop somewhat due to decreased by 1.8 percent in the first half because of the worsened situations in employment and income. decline of settlement-type deposits, including demand Investments for real estate and corporate facilities will deposits. be inactive in the year; however, China will continue to increase in fixed assets investments, as large-scale infrastructure investments financed by the government Outlook are planned. The export growth will be weakened as overseas demand is to decline sharply following the In 2009 the world economy is expected to see its economic downturn in developed countries and growth rate drop sharply due to persistent unrest in sluggish growth of emerging markets. international financial markets following the The Japanese economy is expected to record a weakening of financial institutions in advanced negative growth in 2009 as a result of a synchronized countries and the consequent spread of negative downturn of domestic demand and export. Exports will effects to the real economy. IMF estimates that global exhibit an accelerated decline as the slump of the U.S. economic growth rate of 2009 will be -1.3 percent economy is likely to spread into emerging markets in which is the lowest since World War II. Asia. Private consumption in Japan will be inactive The U.S. economy is anticipated to record a negative owing to the deteriorating situations in employment growth for the first time since 1991. Personal consump- and income. However, it will not be worsened deeply in tion and corporate investment will show marked 2009 due to the help of strengthened real purchasing decline when, as foreseen, the financial markets power as consumer price inflation will be kept under turmoil, the housing market slump and employment downward control. Sluggishness of facilities invest- sluggishness continue. Export growth will also be ment will deepen further as corporate profitability decelerated due to the slowdown of global economy. To deteriorates and cash flow dwindles following the observe by sector, personal consumption is expected to descent of stock prices and the rise of a stronger yen. diminish for the first time since 1980 due to the effects The recovery of housing investment will slackened a of the worsening employment situation, the negative little, and public investment will have its decreasing asset effect from the decline of housing and stock rate slowed, thanks to economic policy measures, etc. prices, the shrinkage of consumer confidence, etc. The Eurozone economy is expected to show a negative Corporate investment will dwindle sharply due to growth in 2009 for the first time since the launch of dampened investment spirits in the wake of the Euro currency, due to persistent deterioration of the economic slump and credit crunch. It is estimated that management environment in the wake of the financial investment for housing construction will continue to market unrest. By demand section, private consumption decrease. The export growth will slacken owing to will be slowed down as affected by a worsening overseas reduced demand, but imports will also be employment situation and negative assets effect, sluggish in the year, so that net exports will be kept up following the descent of assets value. Fixed investment in 2009, contributing positively to economic growth, in Eurozone countries is expected to decrease due to albeit on a small scale. dampened investment spirits under the impact of The Chinese economy is expected to have its growth prolonged economic uncertainty, deterioration of rate lowered considerably owing to sluggish exports corporate profitability, and application of more tight under the impact of global economic slump, despite the criteria for lending, etc. Exports will also decline due to government’s measures to stimulate domestic demand. a subdued demand by major trading partner countries. 12 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.
  13. 13. ● Overview of Economy Furthermore, the housing price bubbles have been due to deteriorated employment situations. However, relatively high in the Euro-area, and consequently there low interest rates and the government’s measures to is a worry that the housing market slump and financial stabilize livelihood and employment of the public will market unrest will bring more serious impact to the act positively to restrain consumption shrinkage. area. Regardless of the improvement of corporate funding In the international financial market, it is highly prob- conditions (like low interest rates and a relaxed credit able that the U.S. dollar will maintain strong conditions crunch), the facilities investment will decline sharply against the Euro currency owing to the preference for owing to worsened corporate profitability and safe haven assets, settlement of de-leverage and carry dampened investment spirits. As for construction trade by financial institutions. However, there is a investment, building construction may be sluggish due different prospect in this regard that if the global to economic slowdown and housing market shrinkage, financial markets stabilize and economic recovery but it is expected to rise slightly thanks to activated begins during 2009, the U.S. dollar will shift to a civil construction in the public sector centering on SOC weaker trend, reflecting fundamentals of its economy. investment. Exports (volume of goods basis) are As for the yuan, there is speculation that the Chinese foreseen to fall back owing to a decreased overseas government may implement a devaluation of the yuan demand as affected by the global economic slump, on a relatively large scale in order to curb the export trade-related financial strain and strengthened slowdown caused by the global economic slump. protectionism. Imports (volume of goods basis) are However it seems highly probable in view of the side foreseen to decrease on a larger scale than exports effects from currency devaluation, such as outflow of owing to a decline in oil prices and dwindling domestic foreign capital, and of the Chinese government’s efforts demand. made so far to internationalize the yuan, that it will be The current account in 2009 will probably be shifted to depreciated only on a small scale or maintain stability. a surplus from the deficit of the previous year. Surplus During 2009 international oil prices are expected to in the goods account is foreseen to increase sharply, drop sharply compared to the previous year, as demand and the accounts of service, incomes and transfer will will dwindle mainly in advanced countries and as see a reduced deficit owing to lessened payment for inflow of investment funds into the raw material outbound travel. market will not be easy until the financial markets are The employment situation in Korea will deteriorate stabilized. However, considering that recently the level owing to a weakened employment capacity in the of oil prices has fallen far below the marginal private sector, lowered profitability of small-sized production costs, and that consequent investments for enterprises, etc. In the latter half of 2009, however, the petroleum resources exploitation are being reduced or cut of the number employed will be slowed when the cancelled, there exists a latent possibility that OPEC revised supplementary budget is fully executed by the will further cut oil production. Combined with other government. concerns that may affect oil supply, such as the Consumer prices will exhibit a slackening of growth as persistent geopolitical unrest of major oil producing international raw material prices are stabilized down- countries like Nigeria and Iraq, the present circums- ward, owing to the global economic slump and ease of tances involve a considerable uncertainty. demand pressure following a sluggish domestic In 2009, the Korean economy is expected to record a demand. In particular, commodity price inflation will be negative growth rate for the first time since the restrained in the second quarter thanks to the mirror outbreak of the foreign currency crisis, owing to a effect of last year’s surge of international oil prices, and synchronized slowdown in export and domestic demand thus the commodity price inflation will stand within the under the impact of the global economic slump. target range (3.0±0.5%). However, the core inflation is Private consumption will decrease from 2008 as it is expected to be higher than the commodity price foreseen that the purchasing power of households will increase rate, which is attributable to the upward trend be weaker and more efforts will be made for saving of industrial goods prices (except petroleum), which has 13 >The Korean Advertising Yearbook 2009 The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.