Research Reports
Impact of Change in Current Foreign and Domestic Economic Conditions on Korean Agricultural Sector and Policy Issues
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AuthorKim, Myunghwan
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Publication Date2008.12.01
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Original
The United States financial crisis is affecting not only world economy but also Korean economy resulting drastic shrinking object economy including consumption and investment. Many experts agree that this economic stagnation continues at least two years. Korean agriculture is expected to be negatively influenced by this shock. This study is carried out to analyze the impact of change in economic conditions including GDP growth rate, exchange rate, and international oil price on Korean agriculture and suggest some policy issues.
According to our analysis, higher exchange rate and international oil price lead to more agricultural production costs, which reduces agricultural income and value added. It is estimated that agricultural production including rice decreases at an annual rate of -0.2∼-2.3 percent. Due to increase in intermediate input costs, agricultural value added and income is expected to be continuously decreased for five years 2008∼2012. This implies that Korean agriculture will record minus growth unless new growth momentum such as expanding agricultural export is provided. Farm household agricultural income is also forecasted to be dropped for the years. In 2012, farm household agricultural income is expected to be 6,858∼9,421 thousand Korean won depending on the situation of external conditions. Off-farm income is forecasted to be shown a slight increase. As a result, farm household income will be stagnant or decreased. In 2012, farm household income is expected to be 28,953∼32,594 thousand Korean won.
Policy measures mitigating farm household economy difficulties are to be institutionalized. Under the system, subsidy for fuel and fertilizer would be automatically provided if the prices of those inputs are above a certain level. In mid and long term, improving agricultural competitiveness is most important for coping with external shocks.
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