Recently published research from Business Monitor International, "South Korea Infrastructure Report Q4 2013", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 09/10/2013 -- As expected, the South Korean construction sector is on track for a mild recovery in 2013, with Q113 data showing positive growth for the first time since Q112. We have however, revised down our expectations for the recovery and our medium-term outlook for the construction sector. Construction real growth is forecast to reach 2.0% in 2013 (previously 2.7%) and to average 1.1% per annum between 2014 and 2017 (previously 1.4%). This is primarily due to a worsening outlook for the South Korean infrastructure sector. The South Korean government has decided to significantly reduce infrastructure spending over the next four years and there are growing signs of delays among non-nuclear power plant projects due to public opposition.
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Key growth drivers over the previous quarter that impact infrastructure development:
- In May 2013, the South Korean government announced that it would cut social overhead capital expenditures (which include spending on transportation and electricity) by KRW11.6trn over the next four years and use the funds for its social welfare programmes under its five-year (2013-17) budget plan. We believe this reduction in government infrastructure spending means that over the near-term, there is little scope for a sharp pick-up in domestic infrastructure orders as the majority of domestic infrastructure orders are from the public sector.
- In June 2013, the South Korean government revealed that it plans to breakup KORAIL into three separate companies by 2017. According to the Ministry of Land, Infrastructure and Transport, KORAIL will first set up a new subsidiary before the end of this year to operate the new KTX line that starts from Suseo in south east Seoul and ends at a junction on the existing Gyeongbu High Speed Railway line. The Suseo line is expected to start operations in 2015.
- As of June 2013, the government has suspended the operation of six nuclear reactors, including three newly built reactors, after they were found to have been supplied with substandard control cables under falsified warranties. In the same month, the Ministry of Trade, Industry and Energy fired the CEOs of state-owned Korea Hydro & Nuclear Power and KEPCO E&C, holding them accountable for the scandal.
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