Factor Analysis of Increasing Consumer Goods Imports & Countermeasures
|Author||Rhee Imja, Lee Kyoungsook, Kim Jongki, Kim Kyungyou, Lee Jun, Cho Yongwon, Park Sangsoo||Date||2016.12.28||Page|
Despite continued slower economic growth and weak domestic demand, imports of consumer goods have continued to grow and their market share has continued to increase. Korea’s GDP grew less than 3 percent (2.6%) in 2015, sparking concern that the Korean economy is trapped in structural low growth. From 2010 to 2014, Korea’s exports of consumer goods grew at an average annual rate of 5.5 percent, whereas its imports increased 10.4 percent, a more than double growth. Of particular note is that, in 2015 when the domestic economy and consumption remained sluggish, the total value of imports recorded a 16.9 percent year-on-year increase, whereas consumer goods imports rose 3.4 percent during the same period. As of September 2016, total exports of consumer products fell 10.6 percent, whereas their imports grew 1.0 percent. Against this backdrop, there is a rising need to examine the multiple factors at work in growth of Korea’s imports of consumer goods.
It is a widely-known fact that growth in key export industries was the key driver behind Korea’s economic development in the past. However, except for a few industries such as semiconductors, displays and shipbuilding, the manufacturing sector is producing more goods for domestic consumption than for export. This means the domestic market is still an important source of revenue for Korea’s manufacturing industry. According to the findings of this study on six consumer goods industries, as of 2014, the share of exports among locally-produced goods stood at 37.3 percent, whereas that of goods for domestic consumption reached 62.7 percent. There is particular concern that if the market share of imported consumer goods continues to rise, the growth of unemployment, despite the recovery of Korea’s economic growth rate, will accelerate for some of the leading labor-intensive assembly industries including automobiles, electronic appliances, apparel, and food. As such, as consumer goods imports continue increasing their presence on the domestic market, the very foundations of Korea’s manufacturing industry will likely be shaken. Notwithstanding, the government’s industrial policy has focused more on the facilitation of exports and the nurturing of promising future industries from a mid- and long term perspective, rather than on stimulus of the domestic market. Therefore, the time is now for Korea to closely examine the current situation of consumer goods imports onto the domestic market, and take prompt action in response to the current sharp increase in this area.