Abstract
We are forecasting the South Korean economy to contract by 3.3% in 2009 as
exports of key
manufacturing goods such as autos and electronics suffer on
the back of the global recession, and
domestic consumption and investment
continue to slump. We expect the brunt of the contraction to be
experienced in H109, with the second half of the year recording slightly
positive growth. With the global
economy still in the doldrums in 2010, we
are expecting South Korea to post a relatively mild recovery,
with GDP
growth clocking 1.8%.
As we suggested in February, the Bank of Korea (BoK)
has now become more cautious in its rate-setting
policy after having cut
the benchmark Korea Base rate by 325bps since late October, keeping it on hold
at
2.00% on March 12. We are expecting the BoK to cut rates twice to 1.50%
by the end of the year, and
still see the purchase of treasury bonds as a
possible option for the central bank to inject liquidity into the
market
and bolster the economy.
We expect South Korea to post a current account
surplus of US$4.6bn in 2009 on the back of an
improved trade account - as
imports contract more sharply than exports - and a narrowing services
deficit.
However, a continued deleveraging of foreign debt will keep the
financial account in the red, with the
BoK continuing to supply US dollars
to the market to avoid too sharp a decline in the won.
The forthcoming
announcement of the EU-South Korea FTA will put pressure on the US Congress
to
move forward with ratifying the stalled KORUS free trade agreement.
However, with concerns about the
domestic economy dominating the agenda in
Washington, we do not foresee the deal being ratified in
2009. Indeed,
further concessions on the South Korean side will most likely be needed to
appease critics
of the deal in the US Congress.
In the Asia Pacific,
we profile 23 companies. These are AEGON, AIG, Allianz, Aviva, AXA,
Cardif,
Fortis, Generali, Groupama, HDI-Gerling, HSBC Insurance, ING
Group, Liberty Mutual,
Manulife, MetLife, Prudential Financial, Prudential
plc, QBE, RSA, Sun Life Financial, The
Hartford, Principal Financial Group
and Zurich Financial Services.
We also look at various local firms that
are active in the region: some of these companies rank, in terms
of the
premiums that they write, among the largest in the world.
We estimate
that, over the course of 2008, total premiums in South Korea rose by 13%
to
KRW119,329,644mn. Non-life premiums rose by 15% to KRW42,004,008mn,
while life premiums rose
by 12% to KRW77,325,637mn.
Between now and
the end of the forecast period, we expect that annual non-life premiums will
grow by
KRW19,392,592mn, while annual life premiums should increase by
KRW16,798,493mn. Growth in nonlife
premiums should be driven by the
general growth in nominal GDP from 4.34% to 5.35%. Growth in
life premiums
should be driven by the change in the overall population and a rise in life
density from
US$1,658.60 to US$1,800.00 per capita.
BMI' s Insurance
Business Environment Rating is 72.3.
| 
View Cart
