As negative factors pile up, forecast is bound to be dim

With only a day until the Korean central bank announces its outlook for this year and next year, there are already growing concerns about negative factors piling up, from strikes to restructuring of the shipping and shipbuilding industries and the Galaxy Note7 debacle.

The Ministry of Strategy and Finance on Tuesday released its economic evaluation for this month and noted that economic recovery has become unstable due to the struggles in Korea’s exports and production affected by strikes, including in the automotive industry.

The Finance Ministry’s report noted that because of the strike at Hyundai Motor, industrial output from the manufacturing and mining industry in August fell 2.4 percent compared to a year earlier. Production of automobiles shrunk nearly 18 percent.

As a result the average operation rate for production lines has fallen to 70.4 percent, 3.4 percentage points less than July’s and the lowest in nearly seven and half years.

The last time the figure was this low was in March 2009 when it drooped to 69.9 percent.

Korea’s exports are even more concerning as last month’s fall turned around August’s increase, which ended a 19-month decline. In September Korea’s exports fell 5.9 percent compared to a year ago.

The situation is expected to be worse with the pulling of Galaxy Note7s from sale overseas. Samsung Electronics Monday decided to pull the plug on sales of its latest smartphone after units kept catching fire, including replacements for recalled units.

The decision is already expected to have a huge dent on the nation’s exports.

Mobile phones account for 2 percent of Korea’s exports and contribute 2.4 percent to the nation’s industrial output. Among all mobile phone exports, Samsung holds a 60 percent share.

“How Samsung Electronics handles the situation will have an influence on the economy,” said a ministry official.

According to the Korea Customs Service, strikes, including one by a cargo union, and the Galaxy Note7 disaster led to a 18.2 percent shrinkage in exports in the first 10 days of this month compared to the same period last year.

Because of the Galaxy Note7 problem, mobile telecommunication exports fell 31.2 percent while automotive exports nosedived 51.9 percent.

Exports to Korea’s major markets have retreated sharply. Exports to the U.S. fell 23 percent compared to a year ago while those shipped to China dropped 18.3 percent.

The Finance Ministry noted that the U.S. presidential race and the county’s antigraft law were other factors that could further hurt the country’s economy.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]