Nomura sees slowdown on structural reforms

Structural reforms in Korea’s key industries and in the labor market will slow the country’s economy next year, Nomura Financial Investment said on Wednesday.

The brokerage firm pointed to restructuring as a reason for its trimming of the economic growth forecast for 2019 to 2.5 percent from its previous projection of 2.7 percent.

The forecast is conservative compared with those by local entities. The Bank of Korea put the growth outlook for 2019 at 2.7 percent, and the state-run Korea Development Institute (KDI) put the figure at 2.6 percent for next year.

“Key industries, particularly auto and shipbuilding parts, have experienced structural reform and that will continue for a couple of years,” Kwon Young-sun, senior Korea economist at Nomura, said at a briefing in Seoul.

Pointing to the negative growth in China’s auto industry and GM’s ongoing restructuring, the expert said the industries “appear to have experienced the global consolidation in earnest.”

The restructuring in some service sectors and self-employed businesses will also challenge the local economy, which is an unintentional development sparked by the increase in the country’s minimum wage.

This year, the government hiked the minimum wage by 16.4 percent to 7,530 won ($6.70) per hour. Next year’s minimum wage has been set at 8,350 won, up 10.9 percent from this year.

Yonhap