Senior presidential secretary for economic affairs Lee Ho-seung dismissed talks of economic crisis by saying “the Korean economy is performing relatively well.” On comments that South Korea’s economic growth rate falls short of potential growth rate, Lee attributed it to business cycle.
By dictionary definition, the current economic situation in Korea may not be called an economic crisis. Saying “the economy is bad” over and over again might make the situation worse as psychological factor plays a major role in economy. But it is hard to agree with policymakers, who say that South Korea is doing relatively well compared to advanced economies because their economy has already reached maturity.
The South Korean economy is expected to see a growth rate of just 2.2% this year from 2.6-2.7% of last year, according to the Bank of Korea’s forecast. It has been long since foreign institutions, such as Bloomberg and ING Group predicted that the country’s growth rate would slow to the one percent mark. South Korea’s exports are extending their slump to an 11th month and businesses are been hit by weak economic indicators. The Financial Times and U.S. think tank The Brookings Institution said Monday that the global economy has entered a period of synchronized stagnation. South Korea, which is highly dependent on markets abroad, is experiencing a particularly steep decline in exports and growth rate.
With South Korea’s economic fundamentals becoming weaker, labor and environmental regulations, such as minimum wage increase, 52-hour maximum working week, and chemicals control act have been implemented at once, putting pressure on businesses’ shoulders. Unexpected economic risks, such as Japan’s export controls are straining the domestic economy but the government is slow to implement regulatory reform. Heads of small and medium-sized companies in the shipbuilding industry held a press conference Monday and expressed the difficulties they are experiencing by saying they may not survive if the 52-hour workweek rule is being implemented all at once next year. The reality is that the existing industries are concerned about their survival and future industries, such as autonomous vehicle are overtaken by China. The South Korean economy might fall into a serious crisis if policymakers continue to say that the economy is relatively doing well or blame the economic slowdown on factors outside the country.