Corporate investment contribution to the Korean gross domestic product (GDP) fell to the worst level in 39 years and the share of private consumption to the lowest in 27 years, underscoring shriveled domestic demand as the result of a prolonged slowdown in the global economy.

According to data from the Bank of Korea and Statistics Korea on Sunday, the share of gross fixed capital formation, net additions of capital stock such as equipment, buildings and intermediate goods to provide services and goods in the country’s GDP dropped 0.1 percentage point from the previous year to 29.1 percent in 2015, the lowest since 26.4 percent in 1976. The data serves as a barometer for corporate spending to increase fixed assets for production and services, and an increase translates into output capacity and national income levels. The share against the GDP has been dwindling ever since it peaked at 31.4 percent in 2008 at the onset of a global financial crisis. Worse, there is little sign of improvement. In February, capital investment fell 7.5 percent on year, the steepest in 18 months.

Sluggish corporate spending is reflected in bank data as well. According to the Bank of Korea, corporate savings balance in local banks reached 348 trillion won ($304 billion) at the end of last year, up 8.3 percent or 26.7 trillion won from a year ago, sharply from a 3.4 percent on-year gain in 2014, as companies withhold investment amid uncertain economic outlook at home and abroad. That was also the highest level since 10.5 percent in 2011.

Consumer front is no better. Share of private consumption against the GDP sagged by 0.8 percentage point from the previous year to 49.5 percent, the lowest since 48.3 percent in 1998 following the Asian financial crisis. The share of private consumption has been declining from 51.4 percent in 2012 to 50.9 percent in 2013 and 50.3 percent in 2014 to fall below the 50-percent threshold last year.

By Lee Sang-duk

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