Park Ji-eun’s dream of buying her first house in Seoul collapsed along with South Korea’s shares and currency.
“I’ve never seen the economy so bad,” said Ms Park, a freelance scriptwriter whose pay from a radio music programme was cut 15 per cent after the station suffered a drop in advertising. “I’ve worked on this programme for eight years, and this is the first time I’ve ever had my pay cut.”
From writers to builders to chief executives, the won’s 26 per cent slump and the Korea Composite Index’s 40 per cent plunge this year have revived memories of 1997, when the government was forced to turn to the International Monetary Fund for a US$57 billion bailout. Only this time, they say it will be worse.
Housewife Tae Hur has stopped dining out and shopping. Ms Hur joined a stock investing boom last year as the benchmark index surged 33 per cent to record highs, along with jumps in overseas markets.
Now, she is watching her savings disappear with “a desperation like nothing during the Asian crisis”.
The number of retail equity investment accounts more than doubled to a record 17 million last year from 2006, according to the Asset Management Association of Korea.
“People piled into stocks late last year because they were feeling left out of the bonanza, with the [Korea Composite Index] hitting 2,000 [points] and Chinese stocks gaining more than 100 per cent,” said Park Hyun-chul, a fund analyst at Meritz Securities. “Most of them have never experienced a market like what we have now, so it’s hard to bear.”
Son Yu-nam, who installs electrical systems in homes and offices, said business was flagging and he was facing delays in payments for previous jobs as the downturn deepened.
“There was still a lot of building going on in the first half, but that’s drying up these days,” he said.
The backlog of unsold homes this year surged to the highest in more than a decade, and defaults by Korean builders increased for the first time in five years.
Mr Son said business was brisk during the 1997 crisis. “[But] I’m not seeing that this time around.”
Korean stocks fell 42 per cent in 1997, while the won plunged to 1,695 against the US dollar, from 844.90.
This year, the benchmark stock index has fallen as much as 51 per cent and the won is the worst-performing currency in Asia.
The economy expanded 0.6 per cent in the third quarter, down from 0.8 per cent in the past three months, as consumer spending stagnated and exports fell the most in seven years.
Korea’s jobs growth moderated in September to the weakest in more than three years as manufacturers, builders and retailers cut staff.
And it is not just workers facing fallout from the credit crisis sweeping the globe - chief executives from 18 Korean banks have taken a pay cut.
Banks felt “deep responsibility for the current situation” and wanted to “share Koreans’ pain”, the executives said last month.
As the global slump drives down exports, Korean consumers, saddled with record debt, are paring spending. Household debt was 153 per cent of disposable income in the second quarter, according to UBS.
Spending at the nation’s biggest department stores fell 0.3 per cent in September, the first decline this year, Ministry of Commerce data showed.
“Korea is the one economy in the region with a very large domestic credit bubble,” said Duncan Wooldridge, UBS’ chief Asia economist. “There are signs that the bubble is bursting. The economy should slow more rapidly in the quarters ahead.”
UBS forecasts the economy’s expansion will cool to 2.9 per cent next year, the weakest pace since 1998.
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Like 1997, but worse, say struggling Koreans
Belts being tightened to ride out downturn
Bloomberg in Seoul
4 November 2008
Park Ji-eun’s dream of buying her first house in Seoul collapsed along with South Korea’s shares and currency.
“I’ve never seen the economy so bad,” said Ms Park, a freelance scriptwriter whose pay from a radio music programme was cut 15 per cent after the station suffered a drop in advertising. “I’ve worked on this programme for eight years, and this is the first time I’ve ever had my pay cut.”
From writers to builders to chief executives, the won’s 26 per cent slump and the Korea Composite Index’s 40 per cent plunge this year have revived memories of 1997, when the government was forced to turn to the International Monetary Fund for a US$57 billion bailout. Only this time, they say it will be worse.
Housewife Tae Hur has stopped dining out and shopping. Ms Hur joined a stock investing boom last year as the benchmark index surged 33 per cent to record highs, along with jumps in overseas markets.
Now, she is watching her savings disappear with “a desperation like nothing during the Asian crisis”.
The number of retail equity investment accounts more than doubled to a record 17 million last year from 2006, according to the Asset Management Association of Korea.
“People piled into stocks late last year because they were feeling left out of the bonanza, with the [Korea Composite Index] hitting 2,000 [points] and Chinese stocks gaining more than 100 per cent,” said Park Hyun-chul, a fund analyst at Meritz Securities. “Most of them have never experienced a market like what we have now, so it’s hard to bear.”
Son Yu-nam, who installs electrical systems in homes and offices, said business was flagging and he was facing delays in payments for previous jobs as the downturn deepened.
“There was still a lot of building going on in the first half, but that’s drying up these days,” he said.
The backlog of unsold homes this year surged to the highest in more than a decade, and defaults by Korean builders increased for the first time in five years.
Mr Son said business was brisk during the 1997 crisis. “[But] I’m not seeing that this time around.”
Korean stocks fell 42 per cent in 1997, while the won plunged to 1,695 against the US dollar, from 844.90.
This year, the benchmark stock index has fallen as much as 51 per cent and the won is the worst-performing currency in Asia.
The economy expanded 0.6 per cent in the third quarter, down from 0.8 per cent in the past three months, as consumer spending stagnated and exports fell the most in seven years.
Korea’s jobs growth moderated in September to the weakest in more than three years as manufacturers, builders and retailers cut staff.
And it is not just workers facing fallout from the credit crisis sweeping the globe - chief executives from 18 Korean banks have taken a pay cut.
Banks felt “deep responsibility for the current situation” and wanted to “share Koreans’ pain”, the executives said last month.
As the global slump drives down exports, Korean consumers, saddled with record debt, are paring spending. Household debt was 153 per cent of disposable income in the second quarter, according to UBS.
Spending at the nation’s biggest department stores fell 0.3 per cent in September, the first decline this year, Ministry of Commerce data showed.
“Korea is the one economy in the region with a very large domestic credit bubble,” said Duncan Wooldridge, UBS’ chief Asia economist. “There are signs that the bubble is bursting. The economy should slow more rapidly in the quarters ahead.”
UBS forecasts the economy’s expansion will cool to 2.9 per cent next year, the weakest pace since 1998.
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