Market Insights

Economy

The Korean economy - Asia's fourth largest -- appears on track for steady growth, although the slowing recovery in the United States and other major economies, and signs of regional fallout from Europe's debt crisis, all present risks. South Korea's key stock index has fallen over 16 per cent since August 2011 due to worries about the US economy, its credit rating, and the eurozone debt crisis.

GDP growth was 3.6 per cent in 2011, down on the government's estimate of 3.8 per cent on the back of a poor fourth quarter, when South Korea recorded its lowest growth in two years.

The Bank of Korea attributed slower growth to weaker exports and sluggish investment in the construction industry, which offset a steady rise in private consumption and a significant increase in infrastructure investment.

The potential for prolonged fears over the current state of the market, and the grim outlook for the global economy, may impact on Korea's exports, which account for about half its economic output. That has sparked concern that it may struggle to meet its growth target of around four per cent in 2012, with the IMF and Bank of Korea both down-grading their estimates to 3.5 per cent after disappointing first-quarter results.

Key Indicators

Sources:
www.economist.com (GDP Growth)
www.xe.com (Exchange rates)

Outbound Travel

Until March 2011, the total number of Korean outbound travelers had continuously increased with 16 consecutive months of growth. However since then, the number of outbound travelers leaving Korea has dropped sharply, mainly influenced by the Japanese tsunami, and the ash cloud disruptions as a result of the Chilean volcanic eruption.

Korean visitors to Japan plunged 32 per cent in 2011, which has also impacted on other Pacific Rim countries and long-haul destinations, including Saipan (down eight per cent), Australia (down 12 per cent), and Canada (down 7.9 per cent).

However the market has been slowly recovering, with increased demand for short-haul destinations, and the total number of international travelers from South Korea still rose 1.6 per cent in 2011. Demand is expected to grow strongly in 2012, with leading wholesalers forecasting increases of over 20 per cent in travel bookings.

The main focus of South Korean group tours has shifted to Europe and the United States, driven by favourable exchange rates, increased airline capacity, and aggressive pricing. The strong Australian dollar has seen a slow-down in Korean arrivals to Australia and the wider Oceania region.

Airline Update

Korean Air resumed its daily services to Auckland in October last year, and added three additional services over the December-January high season. The airline also extended these additional services to Sydney, which helped to drive additional dual-destination traffic. In late March the Auckland service was reduced to five flights a week until late October as part of Korean's seasonal adjustment. The airline plans to resume its daily service to Auckland in October, again running through until March 2013. Air New Zealand's new code-share with All Nippon Airlines from Korea, beginning on 1 June, is expected to provide improved regional connections and access from Korea to New Zealand, with convenient one-stop connections in Japan.