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Corporate investment-GDP ratio hits 39-yr low in 2015

All News 10:35 April 03, 2016

SEJONG, April 3 (Yonhap) -- The portion of South Korea's corporate investment in its gross domestic product plunged to a 39-year low last year amid a protracted economic slump, with that of private consumption also falling to the lowest level in 27 years, government data showed Sunday.

The country's gross fixed capital formation accounted for 29.1 percent of the GDP in 2015, down 0.1 percentage point from a year earlier, according to the data compiled by Statistics Korea and the Bank of Korea.

The figure marked the lowest since 1976, when it hit 26.4 percent.

The indicator, formerly called gross domestic fixed investment, measures corporate spending injected into land improvements, plant and machinery purchases, and roads and building constructions.

The corporate investment-GDP ratio has been on a steady decline since it touched 31.4 percent in 2008.

For the first two months of 2016, the business circle still remained reluctant to make new investments due to the sluggish economy stemming from faltering exports and domestic consumption.

Facility investment fell for the second consecutive month in February and the inventory rate stayed over 128 percent over the two-month period, while the country's outbound shipments posted negative growth for the 15th straight month in March.

Meanwhile, the government data showed that private consumption took up 49.5 percent of the GDP last year, marking the lowest since 1998, when the figure tumbled to 48.3 percent in the midst of the Asian financial crisis.

The ratio has been falling for the recent three years, dropping from 51.4 percent in 2012 to 50.9 percent in 2013 and 50.3 percent in 2014.

Experts warned Asia's fourth-largest economy of being trapped in a vicious circle -- low economic growth, decreased corporate investment, contracted employment, and reduced household income and consumption.

"We have to reform the structure of the economy and put more emphasis on income redistribution in order to encourage the private sector to spend money," said Lee Jong-woo, a senior analyst at IBK Securities Co. "In particular, it is important to help people spend by raising wages."


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