The korean advertising yearbook 2009

The Korean
Advertising Yearbook
2009

XenoOne

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The Korean
Advertising Yearbook
2009
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. Korea's Advertising Related Statistics 235

The Korean Advertising Yearbook 2009 ©2010 XenoOne Co., Ltd. ©All Rights Reserved.

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.

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.

●
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 2.21
1) Based on figures published by IMF (April 2009) (Japan) 1.44 1.48 1.69 1.51 1.17
2) Dubai spot price, annual average
3) Non-fuel primary commodities index (IMF), Short-term Interest Rates
annual average (United States)5) 2.21 4.07 5.01 3.24 0.08
4) Yield on 10-year Treasury notes, at the year-end
5) Yield on 10-year Treasury notes, at the year-end (Japan)5) 0.00 0.00 0.45 0.56 0.20
6) 3-month maturity dollar LIBOR, at the year-end (Eurodollar Interest Rates)6) 2.56 4.54 5.36 4.70 1.43
7) Closing price on the Tokyo market, at the year-end
8) 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


●
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


●
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 75.2

Notes: 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 4.68
3) Average during the period Yield on 3-year Corporate Bonds3),4) 5.17 5.70 7.02 6.35 6.27 7.19 8.29
4) 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


●
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


●
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


●
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


●
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


●
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.


●
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


●
Overview of Economy

not slowed much due to an appreciation in the
exchange rate in effect since the latter half of 2008.
The financial market of Korea will show high variability
in view of decline in the real economy and persistent
concerns that the global financial unrest is unlikely to
be settled early. It is anticipated that funds inter-
mediation will not function smoothly in 2009.
Considering that domestic financial institutions lack
sufficient foreign currency liquidity and that they retain
relatively small capital, there are worries that the
institutions will be vulnerable to the turmoil of
international financial market. Therefore, if a new
impact arises in international financial markets such as
recurrent weakness in large financial institutions in
advanced nations, the Korean financial market may
show a high level of unrest accompanied by volatility in
domestic interest, stock prices, and foreign exchange. If
such a negative prospect is reflected, there is a distinct
possibility that in 2009 our economy will see an
increase in company bankruptcies, much decreased
investment and a worsened employment situation,
which will deteriorate growth potential and aggravate
unrest in the financial market.
Future economic policy shall be promoted in a way to
concentrate our capabilities on stimulating the domes-
tic demand such as consumption and investment, and
on creating job opportunities, lest the vicious circle of
low growth and sluggish employment should be
repeated. Efforts shall be made to expand the social
security network for low income groups and the
neglected class. In addition, special care should be
taken to clear any uncertainty in the financial markets
through swift measures of corporate restructuring, and
to make funds intermediation function smoothly
through an equity increase for financial institutions.
Measures to strengthen financial regulation and
oversight shall be prepared, as their necessity has been
ascertained in the course of reacting to the global
financial crisis which is still unfinished.


The korean advertising yearbook 2009

The korean advertising yearbook 2009

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The korean advertising yearbook 2009