Korea’s economy will grow only by 1.8 percent next year, according to the OECD’s economic outlook. Until September, the international organization measured the nation’s growth rate at 2.5%, but it recently decided to cut the rate by 0.4 percentage points in just two months. The bigger problem is that such a cut happened while the outlook for global economic growth stayed at 2.2%. The OECD pointed out at the start of its Korea report that the country’s “growth has lost momentum” based on poor global demand for semiconductors, which accounts for 20 percent of Korea’s exports as well as economic downturns of the exports’ destinations, including China and the European Union.
Recently, Korea has been majorly losing its ground as an export-driven country. Its performance in exports declined for the first time in two years. This month alone, the export volume for the first 20 days dropped by 16.7% year-on-year. The eighth consecutive month of trade deficit and the first annual trade deficit in 14 years have become a fait accompli. The Korea Institute for Industrial Economics and Trade also forecasts that next year's exports will decrease by 3.1% compared to this year.
The gap with China is widening in the export of high-tech items. According to the Nihon Keizai Newspaper, in terms of global market share of 56 essential export items last year, China was leading in 15 items, including electric vehicle batteries, closely following the United States (18 items). Korea lost its leading position to China in five products, a third of China’s leading export items, including large-size liquid crystal panels and shipbuilding.
To restore the wounded competitiveness in exports, the number of first-class products with unparallel quality needs to be doubled or tripled. To ensure that happens, the government first needs to unshackle the nation’s enterprises doing global business and revisits the requirements unfavorable to the companies compared to the situation of its competitors. The most urgent priority, for now, is to solve strike issues in logistics and railways, a primary concern for companies dependent on exports.