The word “economy” appeared 27 times in the New Year’s speech of President Wen’s text, but the “economic” of South Korea still showed a red light. The data shows that South Korea’s gross domestic product (GDP) actually increased by 2.7% in 2018, setting a new low in six years. Although the parties have long expected the growth rate, the government is also focusing on the economic field in 2019. However, as the global trade situation remains unclear and the domestic employment environment is deteriorating, the text is “Korean economy.” There is a big question mark behind the slogan of Soaring.
01 Export is weak, employment is worrying
According to data released by the Bank of Korea’s Bank of Korea on January 22, in 2018, the GDP of the Republic of Korea increased by only 2.7% after removing the impact of price changes, the lowest level since 2012, after a lapse of six years. In terms of specific industries, the growth rate of the manufacturing industry slowed down to 3.6%; the construction industry shrank by 4.2% year-on-year, the highest decline in the past seven years.
In the view of the Bank of Korea, the weakness of exports may be the main reason for South Korea’s economic slowdown in 2018. Exports fell by 2.2% due to the decline in exports of semiconductors and other electronic equipment. According to preliminary statistics released by the Korea Ministry of Industry, Trade and Resources, exports unexpectedly fell 1.2% year-on-year in December 2018, after analysts expected an increase of 2.5%.
Li Jiacheng, a researcher at the Northeast Asian Research Institute and the Chahar Institute of Liaoning University, pointed out that as an export-oriented economy with external dependence, the surrounding environment and global trade situation have a great impact on South Korea. China and the United States are the largest and second largest export markets in South Korea respectively. Due to the trade friction between China and the United States in 2018, the manufacturing boom in the two countries has intensified, which has had an impact on South Korean exports.
However, the winter of the Korean economy cannot be attributed to the surrounding situation. The economic policy that the government is pursuing in the country is also one of the “culprits”. Li Jiacheng analyzed the Beijing Business Daily reporter’s report that Wen took the economic route of “revenue-led growth” after he took office, and raised the minimum wage standard sharply. This is a huge blow to employers, especially small and medium-sized enterprises.
According to a group of survey data from the Korean employment website “Alba Call”, 92.7% of individual industrial and commercial households replied that 2 the minimum salary increase will affect their operations: 17% of the shop owners said they would consider cutting existing migrant workers, and 7 % of shopkeepers even consider closing their own stores. The Seoul Metropolitan Government’s large database also shows that in just one city in Seoul, 24,000 individual businesses were closed in a year.
The rising labor costs of enterprises have led to a decline in the willingness of employees. October is the traditional recruitment season in Korea. In October 2018, South Korea employed a total of 27.09 million people, an increase of only 64,000 compared with the same period last year. This is the first time since 2013 that the net increase in employment has been less than 100,000.
Li Jiacheng pointed out that rising unemployment will lead to a general decline in income, which will eventually affect consumption. According to the statistics of the Bank of Korea, the Korea Consumer Confidence Index was 99 in October 2018, down one point year-on-year, continuing the decline since December 2017.
02 Governing the heart and returning to the economy
For the domestic economy red light strobe, Wen is also feeling the pressure. According to statistics, in the 2019 New Year speech, Wen Ze mentioned a total of 27 “economics”, 13 “innovations”, 10 “enterprise” and 6 “jobs”.
Li Guoxian, a professor at the Korea University of Political Science and Economics in Korea, believes that the whole speech revolves around the word “economics”, which mainly reflects the concerns of the government on the current economic situation in South Korea, and on the other hand, the Korean people’s economic problems. Dissatisfaction has already made the article nervous in the government.
In fact, since coming to power, there have been criticisms in South Korea that the text is devoted to diplomacy and light economy. In the 2018 New Year message, only three “economics” were mentioned, while six mentioned “peace” and four times referred to “north”.
Although Wen’s diplomatic efforts also have economic considerations, such as promoting cooperation in the fields of tourism and infrastructure construction, and driving economic growth. However, Li Jiacheng told the Beijing Business Daily that the North-South economic cooperation is still only on paper, and the US sanctions have not been lifted. It will take time to become a new economic growth point.
In the new year, Wen Zai proposed, “We need new industrial policies to open up the “innovation” of creating value to overcome the structural limitations of our economy” and strive for 2019 to let the Korean economy take off. “We will formally budget for the growth of data, artificial intelligence, hydrogen economy, smart factories, and autonomous vehicles, which are the foundation of the fourth industrial revolution.”
On January 3, as the first public event of Samsung in the New Year, Li Zaiyu visited the Samsung Electronics Factory in Suwon, South Korea, and visited the 5G equipment factory and the new generation semiconductor chip factory. In December 2018, the South Korean government announced that it would cooperate with its three major telecommunications operators to provide 5G commercialization services in some regions. This is the first time that a new generation of mobile communication services has been commercialized in the world. On December 3, the Korea Ministry of Industry and Commerce issued a new round of support measures to support and encourage Korean-funded enterprises that set up factories overseas to return to South Korea to set up factories, and proposed to provide up to 10 billion won for companies that move all production facilities back to South Korea. Subsidy.
However, Li Jiacheng said that the investment of large enterprises to stimulate new growth is a temporary stimulus. In fact, the chaebols like Samsung and Daewoo themselves are facing many problems. “For example, the share of Samsung mobile phones in the Chinese market has dropped sharply, and the demand in the semiconductor market is not strong. The orders of Daewoo and other shipbuilding companies have also dropped sharply last year.”
For the company’s relocation, a media survey showed that 96% of the companies surveyed in the United States clearly stated that “there is no intention to relocate existing capacity to South Korea”, while only 1.3% said “willing to actively consider relocating capacity”. .
03 Canary effect
In the 17th century, the British put the canary into the mine to test the air quality. If the canary stopped singing, it means that the air has reached the level of poisoning. Although cruel, but full of warning signs. Today, in the coal mines of the global economy, as the first country to disclose economic data last month, South Korea has become a singular canary, and has become an early warning signal for the economic decline in the eyes of economists.
The disclosure time was only one aspect, making Wall Street fear that the Korean canary is an export indicator. Although Korea’s economy is not large, it exports a wide variety of goods, from petrochemicals to electronics, mobile phones, etc., and exports to China, the United States, Japan and other major trading countries, so its export fluctuations are regarded as its main The “barometer” of the economic situation of trading partners also means that global consumer demand is strong or not.
This is not the first warning from South Korea. As early as last May, South Korea’s exports showed its first negative growth in two years. At that time, Bank of America Merrill Lynch pointed out that this also means that global economic growth and corporate profits are on the verge of danger, which is not good for the global market. Just earlier this month, South Korean central bank governor Li Zhulie expressed concern about the global economic slowdown and trade situation.
Although the global economy is too absolute because of a canary, facing the current trade situation and the endless problems of various countries, even the International Monetary Fund (IMF) is difficult to be optimistic. The IMF released the latest Global Economic Outlook report on the 21st, with the title of “global expansion weakening” and lowered the global economic growth forecast of 2019 and 2020 by 0.2 and 0.1 percentage points to 3.5% and 3.6% respectively. This is also the second time after the IMF cut its global economic growth forecast for the first time in two years in October last year.
“The risk of prospects has exceeded the level considered in previous forecasts,” the IMF gave reasons not only for trade uncertainty, including the Fed’s constant rate hike, the European Central Bank’s withdrawal from quantitative easing, and the UK’s “no agreement. Europe” and so on. The IMF believes that the current financing environment has been tightened since last fall, and the public and private sector debt is at a fairly high level.
The IMF is not the only “seeker”. According to Bloomberg News, a few hours after the IMF released a report, a survey released by PricewaterhouseCoopers showed that 30% of global business leaders expect economic growth to slow down in 2019, with corporate executives in North America particularly worried. . The number of people optimistic about the economic situation has dropped from 63% last year to 37%.