World Economy

South Korea CLI Drops for Second Month

South Korea CLI Drops for Second MonthSouth Korea CLI Drops for Second Month

A leading index that gauges the direction of South Korea’s economy fell below the break-even 100 mark in the first two months of this year, which could bode ill for Asia’s fourth-largest economy going forward, official data showed Sunday.

According to the Organization for Economic Cooperation and Development’s composite leading indicator, or CLI, Seoul’s reading stood at 99.8 in both January and February, Yonhap reported.

The last time South Korea’s CLI had dipped below 100 was in September 2014, when it stood at 99.8.

The Paris-based OECD uses the index to gauge economic conditions six to nine months down the line. It takes into account numbers provided by the Bank of Korea and Statistics Korea in such areas as trade, manufacturing sentiment, interest rates, manufacturing inventory and the main bourse.

A reading above 100 translates into the economic sentiment expecting an expansion, while numbers below the mark indicate negative growth.

The OECD data showed that while there have been fluctuations, South Korea for the most part stayed above the 100 mark from late 2014 onwards, although numbers have been sliding since June 2017.

This is in contrast to other OECD members that have been rising in recent months to stay above the 100 mark. In February, the average for the member states was 100.1 points.

Meanwhile, rapidly spreading global trade protectionism and South Korea’s growing household debt are major risks now facing country’s financial system, another survey showed Sunday.

According to the poll of 72 market watchers of financial officials, researchers and investors conducted by the Bank of Korea, 76% said intensifying trade pressure and global protectionism was the biggest problem facing the country. The rate was 26% in a survey held in November last year.

Asia’s fourth-largest economy is one of the most vulnerable in the world as it depends largely on exports and overseas markets to generate growth.

Washington has imposed a series of import restrictive measures on South Korean steel, washing machines and other products, while the Korea-US free trade agreement, dubbed KORUS, was renegotiated earlier this year in a way that favors the US side.

Household debt, which surpassed 1,450 trillion won ($1.36 trillion) at the end of last year, was picked by 74% of the respondents as a serious threat to the economy.

The country’s household debt has been on a steady rise on the back of a property market boom that has been fanned by the government for years in an attempt to bolster the housing market and prop up growth.

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