BNK Financial Management Research Institute "Southeast Region Economy to Grow 2.9% Next Year... Manufacturing Recovery Expected"

'2021 Southeast Region Economic Outlook' Report Released
Southeast Region Economic Growth Rate Forecasted at 2.9%, Expected to Recover from This Year's Negative Growth

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[Asia Economy Reporter Park Sun-mi] Next year, as the novel coronavirus disease (COVID-19) situation calms down, the economy of the Southeast region is expected to grow by 2.9%, with all major industries such as shipbuilding, automobile, machinery, petrochemicals, and steel showing improvement.

According to the '2021 Southeast Region Economic Outlook' research report released on the 5th by the BNK Financial Management Research Institute Southeast Region Research Center, the Southeast region's economy is projected to achieve a growth rate of 2.9% next year. Due to recovery in production and exports and the base effect, the growth rate is expected to be significantly higher than this year's -1.9%.

In the manufacturing sector, a rebound is anticipated thanks to domestic and international economic recovery. Major key industries such as shipbuilding, automobile, machinery, petrochemicals, and steel are expected to move out of negative growth and show a recovery trend. However, ongoing US-China trade disputes and strengthened protectionism were mentioned as downside risk factors.

The service industry is also expected to recover from its slump. This is because private consumption recovery is anticipated due to improved consumer sentiment and strengthened government support policies. However, concerns about COVID-19 resurgence, household debt burdens, and sluggish employment markets were identified as limiting factors. In the construction industry, a slight improvement is expected, centered on the public sector, due to expanded government SOC investment and the Korean New Deal policy.

All Major Industries Including Shipbuilding, Automobile, Machinery, Petrochemicals, and Steel Expected to Improve

Looking at each industry, the shipbuilding industry is expected to show a favorable recovery, with LNG ship orders from Mozambique, Qatar, etc., and the replacement effect of aging vessels due to strengthened environmental regulations anticipated. The domestic order volume expected by the market is 5.7 million CGT (Compensated Gross Tonnage) this year and about 10 million CGT next year. Although shipbuilding volume decreased this year due to production disruptions, it is expected to increase next year as production normalizes.

The automobile industry's business conditions are expected to improve thanks to export recovery. The industry expects global automobile demand next year to reach 83 million units, a 10.7% increase compared to this year, indicating positive market conditions.

The petrochemical industry is also expected to improve due to recovery in upstream industries. Ethylene new demand decreased by 2 million tons annually in 2020 but is expected to increase to 11 million tons next year, improving external conditions. Additionally, China's economic upturn, accounting for about 44% of domestic petrochemical product exports, and product price increases due to rising oil prices are expected to act as factors expanding exports.

The steel industry is expected to recover thanks to improved external conditions. Global steel demand is projected to shift from negative growth (-2.4%) this year to a 4.1% increase, leading to improved exports. Most major countries, including the European Union (EU) and North America, which experienced sluggishness this year, are expected to show increased demand due to the resumption of economic activities and base effects. However, the possibility of extending EU safeguards and strengthened protectionism in various countries may act as factors limiting the recovery.

Researcher Baek Chung-gi of the BNK Financial Management Research Institute Southeast Region Research Center stated, “Next year, as the COVID-19 situation calms down, the regional economy is expected to show a recovery trend,” adding, “Since the Southeast region is highly dependent on exports, if external conditions improve rapidly, the scale of economic rebound could be significantly larger than expected.”

This content was produced with the assistance of AI translation services.