Boston, MA -- (SBWIRE) -- 01/28/2014 -- We remain cautious about South Korea's economic growth trajectory, despite stronger than expected growth in 2013 (buoyed mainly by the manufacturing and construction sectors). While we do not discount further upside for the rest of 2013 (and have revised our forecasts up to 2.5%), we remain less sanguine towards Korea's economic trajectory in 2014. Korean trade momentum is likely to face continuing headwinds from China. Domestically, the construction rebound that we have witnessed this year is unlikely to extend into 2014 as the property market remains dormant while household debt will continue to crimp spending by the Korean consumer. Taking these factors into consideration, we are happy to maintain our below-consensus real GDP growth forecast of 3.0% for Korea in 2014..

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Headline Industry Data (Local Currency)

- 2014 per capita food consumption = +2.3%; forecast 2013 to 2017 = +3.2%.
- 2014 alcoholic drink value sales = +2.5%; forecast 2013 to 2017 = +3.6%.
- 2014 soft drink value sales = +4.3%; forecast 2013 to 2017 = +4.3%.
- 2014 mass grocery retail sales = +5.7%; forecast 2013 to 2017 = +6.5%.

Key Industry Trends and Developments

Whisky Sales Continue To Fall: Overall whisky sales in South Korea during the first 10 months of 2013 fell by 12.4% year-on-year (y-o-y) to 1.5 million cases, as reported by Yonhap News Agency. The decline has been attributed to the prolonged economic slowdown in the country, with consumers reportedly choosing 'lighter and cheaper' drinks over spirits such as whisky.

South Korea Expands Ban On Japanese Fish: In September 2013, the South Korean government banned the import of all fish products from eight Japanese prefectures deemed affected by radioactive contamination from the Fukushima nuclear plant in Japan. The government took the decision to widen its existing ban on the import of 50 fish products from Japan to address rising consumer fears about the safety of Japanese food products.

South Korea, Malaysia And Thailand Remain Top International Priority For Tesco: Tesco's policy of 'disciplined international growth' has seen the retail giant reduce its overseas capital investment, allocated proportionately according to perceived scope for growth. In both the company's 2013 annual report and its 2013/14 interim results statement (released in October 2013), Korea, Malaysia and Thailand were identified as being Tesco's highest international priority and were continuing to deliver excellent performance (despite headline growth in South Korea being marred by the recent legislative restrictions on large store opening hours etc). For the half-year ending 24 August 2013 the company's Asia region trading profit (excluding China) stood at GBGBP314mn (up 7.4% y-o-y).

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