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Yoon administration's second year to focus on economy

Posted May. 12, 2023 07:50,   

Updated May. 12, 2023 07:50


Korea Development Institute, a state-run research institute, forecasted that Korea’s economic growth rate in the first half of the year would not reach 1 percent. The estimated annual growth rate was also adjusted downward from 1.8 to 1.5 percent, implying that the second half of the year would be slightly more positive but still fall short of the expectation. KDI warned that the annual growth rate for 2023 would be little more than 1 percent should the worst-case scenario occur. There are growing concerns that failing to respond promptly may drag the economy into a long-term recession.

KDI suggested the expected growth rate for the year's first half as 0.9 percent, lowered by 0.2 percentage points from the expected figure three months earlier. It anticipated that chip stockpiles would take some time to be rebalanced, along with the slower-than-expected recovery of the demand for semiconductors. The opportunities posed by China’s reopening remain uncertain. A pessimistic outlook prevails for the Korean economy within the country and abroad. The economic forecast keeps declining every time it is renewed by different organizations. The average growth forecast for the Korean economy compiled by eight global investment banks stood at 1.1 percent as of the end of April.

It is already two weeks into May, but exports, the backbone of the Korean economy, show no sign of recovery. The export amount from May 1 to May 10 was 14.85 billion dollars, down by 10.1 percent YoY. The chip export revenue plunged 29.4 percent, and total exports to China dropped 14.7 percent. There is a much higher likelihood that exports falling for eight straight months and the trade deficit persisting for 15 consecutive months. The trade deficit thus far is 29.41200 billion dollars, already over 60 percent of last year’s annual deficit. The optimistic outlook in the beginning of the year—the economy will improve when the weather gets warmer—is losing its relevance.

The quality of jobs also continues to decline. There was also a significant downturn in the employment rate within the manufacturing sector by 97,000, logging the largest decrease in 28 months since December 2020. Although the number of jobs increased in April, the number of individuals finding employment fell by 90,000, except for the employment of seniors above 60. A notable decline in the number of individuals finding employment was witnessed in young adults, the next generation and the country's future, and people in their 40s, who should support the core of the economy. High-interest rates and high inflation are heavily weighing on households, and financial uncertainties and insolvency risks pose threats to the economy as a potential detonator of the economy.

Many surveys conducted marking the first anniversary of the Yoon Suk Yeol administration show that economic recovery is the key agenda that the government should focus on. People are calling for the government to focus on ‘bread and butter’ issues. The Yoon administration should channel all resources to recover the economy, find a new growth engine, and revitalize exports. It should also focus on preparing a strategy to nurture innovative industries and pool all available investments to support emerging, high-tech industries. Yoon’s two-year report card would depend on whether he delivers palpable economic achievement.