SOUTH KOREA: Continued strong air cargo demand in S. Korea: BMI

A recent report from Business Monitor International (BMI) continues to see a strong economic recovery in South Korea in 2010, a trend favourable to the overall freight industry sector. In particular BMI sees a strong recovery in South Korean airfreight in 2010 saying the latest data available confirms the trend. “We expect total volume of […]


A recent report from Business Monitor International (BMI) continues to see a strong economic recovery in South Korea in 2010, a trend favourable to the overall freight industry sector. In particular BMI sees a strong recovery in South Korean airfreight in 2010 saying the latest data available confirms the trend. “We expect total volume of cargo shipped by air to grow by 7.8 per cent to 3.69 million tonnes during 2010, more than offsetting the 4.1 per cent contraction experienced in 2009. Underlying fundamentals look good for airfreight demand going forward,” BMI said in the report.

BMI is maintaining its projection that GDP growth during the year will reach a strong 5.5 per cent, a welcome change after the standstill in 2009. But BMI noted that other recent developments give cause for some concern, but do not overshadow the positive economic story. The ruling Grand National Party suffered quite serious losses in local elections in June, suggesting it could suffer in-fighting in the run-up to the 2012 presidential elections. Relations with North Korea remain tense and unpredictable, a major source of political risk. BMI still believes all-out war on the Korean peninsula is unlikely, but holds that deadly exchanges on sea or on land are possible as a result of military and/or political miscalculation. “Looking towards 2011, we see the pace of economic growth slowing to a below-trend 3.2 per cent, largely as a result of a slowdown in China, the key market for Korean exports.” South Korea’s foreign trade pattern has become more mature, another way of saying that the period of very, very dynamic export-led growth has ended, says BMI. The research firm says that it expects, in real terms that total trade in 2010 will grow by an impressive 9.5 per cent, but imports will lead the way (+11.5 per cent) with exports lagging behind a little (+8.0 per cent). “In our view, the country’s free trade agreement (FTA) with the EU, and similar negotiations with the US, China and Japan will continue to underpin moderate-to-high trade growth. Rising living standards and greater purchasing power in Korea itself will keep imports ahead of exports over the next five years.” BMI’s five-year forecast in real terms is for trade to grow by an average of 8.2 per cent per annum, as a midpoint between imports (+8.9 per cent pa) and exports (+7.7 per cent) per annum. In nominal terms, in 2010 we are expecting imports to grow by 18.6 per cent to US$505.7 billion, while exports will advance 15.2 per cent to US$523.8 billion.