Signs Point to Deepening Economic Slump

The southeastern port city of Ulsan and neighboring Geoje used to boast one of the highest standards of living outside Seoul. But now a slump in their vital industries is threatening the comfortable status quo.

The shipbuilding, petrochemical and automotive industries that are so vital to that part of the country are all reeling from the global crunch, and some are frightened that a decline is inevitable.

"People here are scared that Ulsan will end up like Detroit in five years," said Choi Chan-ho of the Ulsan Chamber of Commerce and Industry.

As recently as 2008, shipyards in nearby Tongyeong ran night shifts to meet a seemingly never-ending demand for vessels. Today the dockyards are empty, as they are in nearby Geoje and Yeongam in the southwest.

Similar signs of a deepening slump can be spotted in the office buildings of Seoul, where the major conglomerates have their headquarters. Along the main boulevard in Gangam, 42 out of over 100 office buildings there have "for rent" signs up.

Business analysts already believe Korea has fallen into an extended slump as exporters, the backbone of the country's economy, are faltering under external pressures.

The manufacturing industry's total sales shrank for the first time ever last year. And a whopping 32 percent of all companies in Korea cannot even cover the interest on their debts with the operating profit they eke out.

The situation is no different for retailers, many of whom barely managed to stay open this year no matter how they slashed prices.

The effects are everywhere, not least in the real estate market. A record 18.5 percent of office space in downtown Myeong-dong and Gangnam lies empty, and apartment sales in November fell 14 percent compared to the previous month, while 15,576 new apartments were left unsold in October, the first increase in three months.

"Declining exports and a slowdown in private consumption is pouring cold water on the real estate market, which had picked up since the beginning of this year," said Lee Joon-hyup at Hyundai Research Institute. "There's no way Korea can escape the slump unless it makes deep structural changes."