Daily Management Review

Negotiations with the DPRK reduced risks for the world economy


01/09/2018


Resumption of negotiations between South and North Korea is reducing the risk of conflict and, as a result, is lowering threat of serious shocks to the global economy, Bloomberg reports. This opinion was expressed by the chief economist of DBS Group Holdings Ltd. based in Singapore Taimur Baig.



(stephan) via flickr
(stephan) via flickr
According to the economist, the size of the Asian supply chain in South Korea means that the economy of the entire world will be vulnerable if the spat between the countries gains force.

"Any small positive developments [between North and South Korea] are music for our ears," said Baig in an interview with Bloomberg Television, "The South Korean part of the Asian supply chain is so important that if for some reason violence erupts, it may have serious consequences for the world economy. "

South Korea produces many different products, mainly hi-tech. This country is, perhaps, the world's largest manufacturer of cars and the second largest semiconductor manufacturer. Economists warn that a conflict might cause interruptions on important routes of shipping along the eastern coast of China.

"A couple of years ago, when there was a flood in Thailand (the country is not so important in the global supply chain), interruptions have led to a significant chain reaction all over the globe," said Baig, who previously worked for the IMF. "You can imagine how much more serious consequences can be if the said country suffers," he added.

The tension in the region declined on Tuesday, when DPRK announced that it could send a delegation to the Winter Olympic Games that are to be held in South Korea next month. The DPRK expressed its desire to solve the problems through negotiations and dialogue.

As reported earlier, in late December, North Korea called the latest sanctions of the United Nations (UN) against it "an act of war" and promised to continue to strengthen its nuclear arsenal.

Previously, the UN Security Council adopted a new package of restrictive measures in response to the ongoing launches of intercontinental ballistic missiles and nuclear tests in North Korea.

Meanwhile, the consumer price index in South Korea jumped in December 2017 by 1.5% year-on-year after a decline of 0.7% in November.

Analysts predicted the growth of this indicator also at the level of 1.5%.

In comparison with the previous month, consumer prices in South Korea rose by 0.3% in December after deflation of 0.7% in November and with expert inflation expectations at 0.2%.

At that, retail sales in South Korea rose in November 2017 by 5.6% compared to the previous month after a decline of 2.9% in October. Retail sales increased 6.5% in November yoy (after a 0.2% decrease in the previous month).

Earlier it became known that the volume of industrial production in South Korea increased in November 2017 by 0.2% compared to the previous month after a reduction of 1.5% in October. However, in annual terms industrial production in the country decreased in November by 1.6% after a fall of 6.1% a month earlier. Analysts forecasted the growth of the first indicator by 1.2% and the second one by 1%.

The economy of South Korea in the third quarter of 2017 grew at the highest rates over the past seven years amid global demand for electronics: the country's GDP increased by 1.5% compared to the previous quarter.

Thus, the recovery was the maximum since the II quarter of 2010, when GDP grew by 1.7%. In annual terms, economic growth in July-September of this year accelerated to 3.8% from 2.7% in the previous three months.

source: bloomberg.com






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