Ministry of Economy and Finance

In April 2024, the entire industrial production increased ( 1.1%) as those in mining and manufacturing ( 2.2%), services ( 0.3%), and construction ( 5.0%) all rose, while public administration production fell (-0.9%).   Meanwhile, retail sales declined (-1.2%) due to a drop in durable goods (-5.8%) despite the increases in semi-durable goods ( 0.5%) and non-durable goods ( 0.4%). Facility investment also went down (-0.2%) in spite of investment growth in transportation equipment ( 0.3%) as that of machinery moved down (-0.4%). Construction investment went up ( 5.0%) as that of both building construction ( 6.1%) and civil engineering ( 1.7%) rose.   The entire industrial production in April appeared to be back on the recovery track from the temporary adjustment in March, mainly driven by improvements across key production sectors.   In the case of the mining and manufacturing industries, most sectors experienced production growth, resulting in a positive growth rate at the beginning of the quarter for the first time in five quarters. With exports in May also expected to see a significant rise, it is assessed that steady improvements in manufacturing and exports continue to drive economic upturn into the second quarter.   As for domestic demand, while consumption of goods showed some adjustment after rising in the previous month, consumption of services continued to pick up moderately. Investment appears to be bouncing back despite a slight decline in facility investment, thanks to a rebound in the construction sector.   With an aim to achieve tangible economic recovery that actually can be felt by the public, the government will strive to contain prices of food and basic necessities and strengthen government policies by carrying out constant on-site inspections for vulnerable sectors. At the same time, efforts will be made to implement structural reforms to realize a dynamic economy and enhance the country’s growth potential. Please refer to the attached files. 

Statistics Korea released 'Monthly Industrial Statistics, April 2024' report on May 31, 2024. The Index of All industry production in April increased by 1.1 percent from the previous month. Please refer to the attached pdf for the full report.

  The Ministry of Economy and Finance (MOEF) and the Bank of Korea (BOK) have been conducting the pilot program since earlier this year in preparation for the official implementation of the ‘Improvement Measures for Foreign Exchange (FX) Market Structure’ in July 2024. As the initiative announced in February last year primarily pertains to the opening of the onshore FX market and the extension of trading hours (currently from 09:00 - 15:30 → 09:00 - 02:00 a.m. of the following day), the FX authorities have been proceeding with necessary procedures in stages such as revision of the Foreign Exchange Transactions Regulations and registration of the registered foreign institutions (RFI)[1].   Among a total of 23 foreign financial institutions listed as RFIs thus far, more than 10 RFIs are already engaging in the KRW/USD spot trading and FX swaps in the onshore FX market (during regular trading hours and through pilot trading). In addition, the FX authorities have been conducting trial transactions during the extended hours (15:30 to 02:00 a.m. of the following day) to check whether associated procedures such as trade execution, trade confirmation, and settlement are functioning properly. Since February 2024, a total of 8 trial transactions have been carried out, with participation from 27 institutions (15 onshore FX banks, 6 securities firms, and 6 RFIs). These trials involved KRW/USD spot and FX swap transactions through scenarios or autonomous transaction methods[2] and all procedures ranging from trading and settlement to accounting were successfully completed. Starting with trial transactions for FX spot in February, all 9 brokers approved for FX derivatives brokerage (including two brokers for spot trade) have been participating in the pilot program since April and checking on the overall process for FX swap transactions made during the evening and early morning hours.   During the 1st to 4th trial transactions carried out from February to March, the focus was on creating and inspecting an environment where actual FX transactions could occur after the onshore FX market closed (15:30); From April, transactions have been made in a broader range of cases to verify all stages of transaction from trading to settlement, with an aim to preemptively detect and resolve potential issues or obstacles that may arise after the official implementation of the FX reforms.   The 5th trial transactions executed in April 19 (Friday) tested whether FX transactions could be processed normally in the early hours of Saturday, a holiday. The 6th trial in April 29 checked for normal transactions and potential issues with the computer systems at the moment when the date changes at midnight. Participating institutions assessed that they were able to submit bids and offers, and execute trades successfully through the brokers system during the time period, just as during regular trading hours (09:00 – 15:30).   Details of the 5th-6th Trial Transactions > Date Participating Institutions Time frame1) Transaction type Product Transaction Volume (million, $) 5th (Apr. 19) 12 banks 3 securities firms 2 RFIs ① 18:00 - 24:00 ② 00:00 - 02:00 scenario KRW/USD FX swap              390 ② 00:00 - 02:00 autonomous KRW/USD spot exchange               50 ① 18:00 - 24:00 ② 00:00 - 02:00 scenario (newly registered institutions)   KRW/USD spot exchange              28 6th (Apr. 29) 14 banks 4 securities firms 3 RFIs ① 18:00 - 24:00 ② 00:00 - 02:00 scenario KRW/USD FX swap 540 ③ 23:30 - 01:00 autonomous  KRW/USD spot exchange 96 ① 18:00 - 24:00 ② 00:00 - 02:00 scenario (newly registered institutions)    KRW/USD spot exchange 14 Note 1) Transactions in time frame② were conducted after midnight on the following day, with each time frame lasting approximately 1-2 hours. Transactions in time frame③ were conducted from 23:30 to 01:00 of the following day to check on the trading and settlements around midnight.   In the 7th and 8th trial transactions in May, both spot exchange and FX swaps were carried out, placing much focus on autonomous transactions around midnight. In particular, considering that May 27 (Monday) was a public holiday in the United States (the Memorial Day), the test dates were selected with the knowledge that the foreign currency settlements[3] for trades made on May 23 (Thursday) and 24 (Friday) would all be settled on May 28 (Tuesday). Participating institutions confirmed that all FX transactions contracted over the two days were settled successfully on May 28, completing the trades.   Furthermore, liquidity conditions during the extended trading hours were also assessed by conducting the autonomous KRW/USD spot transactions and FX swaps (one-month maturity) simultaneously. Participants in autonomous transactions noted that the bid-ask spreads for KRW/USD spot exchange were similar to or narrower than the spreads in the offshore non-deliverable forward (NDF)[4] market during the same time period. They expressed positive opinions on the outcomes of the pilot program, suggesting that if the trading conditions in the onshore FX market remain favorable following the official implementation, it may be possible to attract offshore NDF transactions into the onshore market.   Details of the 7th-8th Trial Transactions > Date Participating Institutions Time frame1) Transaction type Product Transaction Volume (million, $) 7th (May. 23) 10 banks 4 securities firms ③ 23:30 - 01:00 autonomous  KRW/USD spot exchange                74 ③ 23:30 - 01:00 autonomous         KRW/USD FX swap               160 ① 18:00 - 24:00 ② 00:00 - 02:00 scenario (newly registered institutions) KRW/USD spot exchange                4         KRW/USD FX swap                 80 8th (May. 24) 11 banks 4 securities firms ③ 23:30 - 01:00 autonomous KRW/USD spot exchange                         61 ③ 23:30 - 01:00 autonomous    KRW/USD FX swap                        310 ① 18:00 - 24:00 ② 00:00 - 02:00 scenario (newly registered institutions) KRW/USD spot exchange                         6    KRW/USD FX swap                         20   As the official implementation of the ‘Improvement Measures for FX Market Structures’ approaches in about a month, with the extension of FX market trading hours until 2 a.m. starting from July, the MOEF and the BOK plan to push forward 4 more pilot transactions in extended trade hours during the remaining period of the program to allow more market participants to be ready in advance for changing trading environment. Also, FX authorities will make concerted efforts with proactive moves for the successful execution of the improvement measures by closely working with market participants and diligently monitoring the readiness of RFIs and FX market players.   [1] Registered foreign institutions (RFIs) are foreign financial institutions that have met certain requirements and registered with the FX authorities in order to directly trade in the onshore FX market. [2] Scenario transaction: transactions are made based on predetermined exchange rates, counterparties, brokers, etc. Autonomous transaction: bids are freely accepted and executed at real-time exchange rates, similar to actual transactions during the current FX trading hours. [3] Settlements for spot exchange occurs 2 business days after the trade contract, in accordance with international trading practices. (Since August 2002, FX transactions through brokers in Korea have all been settled on the second business day after the trade.) Therefore, transactions executed on May 23 (Thursday) should settle on May 27 (Monday). However, since May 27 is a holiday in the United States, settlement would be postponed to the next day.  [4] Non-deliverable forward (NDF) is a type of forward contract in which only the difference between the contracted exchange rate and the spot rate at the maturity date (designated rate) is settled in USD instead of KRW. It is commonly used by foreign investors as a hedging and speculative investment tool. Please refer to the attached files.