The word "economy" appeared 27 times in President Moon Jae-in's New Year's address, but South Korea's "economy" still has a red light. Data show that South Korea's gross domestic product (GDP) grew by 2.7 percent in real terms in 2018, a six-year low. Although all parties to the growth rate decline has been expected, the Moon Jae-in government also pointed to the economic sector in 2019, but with the global trade situation is still unclear, coupled with the deterioration of the domestic employment environment, Moon Jae-in let "South Korea's economic takeoff" slogan is still behind a big question mark.
Weak exports, employment worries
South Korea's central bank, the Bank of Korea, released data on January 22, 2018, South Korea's national GDP in 2018, excluding the impact of price changes, only 2.7% growth, a record since 2012, the lowest level after six years. In terms of specific industries, the manufacturing sector grew at a slower pace of 3.6 percent; the construction sector contracted by 4.2 percent year-on-year, the highest rate of decline in nearly seven years.
In the Bank of Korea's view, weakness in exports may have been the main reason for South Korea's slowing economic growth in 2018, which slumped by 2.2% due to a decline in exports of electronic equipment such as semiconductors. Preliminary statistics previously released by South Korea's Ministry of Industry, Trade and Resources (MITR) showed that South Korea's exports unexpectedly slumped by 1.2% year-on-year in December 2018, after analysts had expected a 2.5% increase.
Li Jiacheng, a researcher at the Institute of Northeast Asian Studies at Liaoning University and the Chahar Society, pointed out that as an externally-oriented economy with a draft degree of external dependence, the neighboring environment and global trade situation have a great impact on South Korea. China and the United States are South Korea's first and second largest export markets, respectively, by the impact of the trade friction between China and the United States in 2018, the manufacturing slump in the two countries has intensified, which has impacted South Korea's exports.
A set of survey data from Alba Call, a Korean employment website, shows that 92.7% of self-employed businessmen answered that the 2-raised minimum wage will affect their business: 17% of them said they would consider laying off existing part-time students, while 7% of them even considered closing their own stores. Data from the Seoul Metropolitan Government's big database also shows that 24,000 self-employed stores close in a year in Seoul alone.
Rising labor costs have led to a decline in the willingness of companies to hire workers.October is the traditional hiring season in South Korea.In October 2018, the employed population in South Korea *** counted 27.09 million people, an increase of only 64,000 people compared to the same month a year earlier. This is the first time since 2013 that the net increase in employment in October was less than 100,000 people.
Lee noted that rising unemployment leads to lower incomes overall, which ultimately affects consumption. South Korea's consumer confidence index stood at 99 in October 2018, down one point year-on-year, continuing its decline since December 2017, according to the Bank of Korea.
Returning to the economy as the center of governance
Moon is also feeling the pressure on the flashing red light of the domestic economy. According to statistics, in his New Year's address in 2019, Moon Jae-in*** mentioned "economy" 27 times, "innovation" 13 times, "business" 10 times, and "jobs" 6 times. "jobs".
Lee Kuo-Hyun, a professor at the School of Government and Economics at Korea University, believes that the entire speech is centered on the word "economy", which mainly reflects the Moon Jae-in government's concern about the existing economic situation in South Korea; on the other hand, it also reflects the dissatisfaction of the South Korean people with the economic problems, which has made the Moon Jae-in government a little nervous.
In fact, since coming to power, there have been criticisms in South Korea that Moon Jae-in emphasizes diplomacy and is light on the economy. In his 2018 New Year's message, he only mentioned "economy" three times, while mentioning "peace" six times and "North Korea" four times.
And in the new year, Moon suggested that "we need a new industrial policy to open up value-creating 'innovations' to overcome the structural limitations of our economy" in a bid to make South Korea's economy take off in 2019. "We will officially budget for the growth of innovations such as data, artificial intelligence, the hydrogen economy, smart factories, and self-driving cars, which are the foundation of the Fourth Industrial Revolution."
On January 3, Lee Jae-yong visited the Samsung Electronics factory in Suwon, South Korea, one after the other, as the Samsung head's first public event after the New Year, visiting a 5G equipment factory and a next-generation semiconductor chip factory.In December 2018, the South Korean government announced that it had joined forces with the country's three major communications carriers to offer commercialized 5G services in some areas, marking the next-generation mobile communications service's global For the first time, it has been commercialized.On December 3, the Ministry of Industry and Trade published a new round of support measures to support and encourage Korean companies that have set up factories outside the country to come back to South Korea to run factories and build businesses, proposing that it will provide subsidies of up to KRW 10 billion for companies that move all their production facilities back to South Korea.
However, Lee analyzed that big business investment to stimulate new growth is a short-lived stimulus. In fact, plutocrats like Samsung and Daewoo are themselves facing many problems. "For example, Samsung's share of the Chinese market for cell phones has plummeted, and demand in the semiconductor market is not strong. Last year, Daewoo and other shipbuilding companies also saw a sharp decline in orders and so on."
As for the relocation of enterprises, a media survey showed that 96% of the interviewed South Korean enterprises clearly indicated that "they do not intend to relocate their existing production capacity back to South Korea", while only 1.3% of the enterprises said that "they are willing to actively consider relocating back to the production capacity".
The canary effect
In the 17th century, the British put a canary into a mine to test the air quality, and if the canary stopped singing, it meant that the air had reached a level that would cause poisoning. It was cruel, but full of warning. Now, in the mine of the global economy, as the earliest disclosure of last month's economic data, South Korea has become the canary of this song is weakening, but also become the economist's eyes of the economic decline of the early warning signals.
The disclosure of the time early is only one aspect, so that Wall Street is afraid of South Korea's canary is the export indicators. Although South Korea's economy is not large, but its exports of a wide range of commodities, from petrochemicals to electronics, cell phones, etc., and the object of exports, including China, the United States, Japan and other major trading countries, so the fluctuation of its exports is regarded as the economic situation of its major trading partners, "barometer", but also means that the global consumer demand is strong or not.
This is not the first time that South Korea has warned. As early as May last year, South Korea's exports were in negative growth for the first time in two years. At the time, Bank of America Merrill Lynch pointed out that this also means that global economic growth and corporate earnings have come to the edge of danger, which is very bad for the global market. And just earlier this month, the Bank of Korea Governor Lee Joo-yeol had expressed concern about the global economic slowdown and trade situation.
Although because of a canary on the "downbeat" global economy is too absolute, but in the face of the current trade situation and the countries of the endless problems, even the International Monetary Fund (IMF) is difficult to optimism. IMF on the 21st released the latest "Global Economic Outlook" report to "Global Expansion Weakening" as the title, and cut the global economic growth expectations for 2019 and 2020 by 0.2 and 0.1 percentage points to 3.5% and 3.6%, respectively. This is also following last October, the IMF for the first time in two years to reduce global economic growth expectations after another downward revision.
"The risks to the outlook have exceeded the level considered in previous forecasts," the IMF gave more reasons than just trade uncertainty, including the Federal Reserve's continued interest rate hikes, the European Central Bank's exit from its quantitative easing bond purchase program, the UK's "no-deal Brexit "The IMF believes that the current financing environment has tightened since last fall and that public and private sector debt is at fairly high levels.
IMF is not the only "bearish". According to Bloomberg, just hours after the release of the IMF report, PricewaterhouseCoopers released a survey showing that 30% of global business leaders expect economic growth to slow in 2019, with North American executives particularly worried. The number of people who are optimistic about the economic situation has fallen to 37% from 63% last year.