Although political and economic challenges in South Korea threaten its ongoing cosmetics success, policymakers are encouraging of the country’s potential for growth.
Healthy export levels and capital investments show strong results in Q1, despite concerns relating to political disruption, tensions between the country and North Korea and China, and an upcoming new election on 9th May 2017.
Economic uncertainty is expected to continue throughout Q2 2017. However, Yoo Il-ho, Finance Minister, South Korea told news outlet Yahoo that it currently has no plans for a supplementary budget, and growth is not expected to slow abruptly in this period.
The Bank of Korea announced that the country’s gross domestic product grew 0.9% in Q1, advancing from 0.5% in Q4 2016. In March this year, the Bank modified its growth forecast to 2.8%, up from 2.7%, stating that it had made the revision based on the country's robust manufacturing exports.
South Korea’s political struggle with China over the capital’s decision to adopt the US Terminal High Altitude Area Defence (THAAD) radar system threatened to disrupt the country — famed for its K-beauty and K-pop notoriety — by potentially bringing partnerships and distributor agreements to an end.
Trade restrictions were not merely limited to exports, but the marketing opportunities gained through using celebrities to endorse products too, as China announced its intention to prevent South Korean personalities from advertising domestic products on their media channels.
"Chinese tourist numbers fell due to China's restrictions on travel to South Korea, while consumer sentiment was sluggish. Some also delayed buying their mobile phones waiting for new smartphone releases," said Chung Kyu-il, a director general, Bank of Korea to the press.
As mobile commerce continues to create significant opportunities for cosmetics and personal care producers, brands may have been concerned that these limitations and the reluctance to bring new models to market would have been detrimental to their brand awareness, sales and innovation attempts.
The country’s trade ministry has increased its export outlook in 2017 to 6-7%, a significant lift from the initial 2.9% expectation, largely as a result of greater cosmetics shipments.