Restore investment sentiment

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Restore investment sentiment

Challenges are growing for the Korean economy on both external and domestic fronts. Domestic demand remains stubbornly subdued as job conditions are at crisis-hit levels due to a sharp rise in labor cost. Exports that have sustained the economy until last year have also lost steam. According to the customs office, exports for the first 20 days in January fell by 14.6 percent against a year ago. At this rate, exports will contract for the second consecutive month, the first extended losing streak since a two-month fall in September 2016.

The trend may not reverse any time soon due to concerning signs in the world’s two largest economies. The U.S. Federal Reserve indicated an intention to moderate its benchmark rate hikes after hinting the still-strong U.S. economy may have peaked.

The greater worry is the Chinese economy. According to preliminary figures, the Chinese economy grew by 6.6 percent in 2018, the slowest rate since 1990. Companies’ debts which have snowballed since the opening of the economy in 1978 weigh heavily on the corporate sector. Households also have less purchasing power. Skeptics even warn of a sharp slowdown of a growth in the 2-percent range this year.

The hard-landing of China’s economy could shake the Korean economy as a quarter of Korean exports rely on the Chinese market. Semiconductor exports to China plunged by 28.8 percent in the first 20 days of January due to the thinning demand from China. The Korean economy has exposed its fragility and weakness after the semiconductor boom fizzled out. On Monday, the government held an expanded government-private meeting to discuss ways to bolster exports.

What is more imperative than meetings are concrete measures to restore investment sentiment. The government must remove various anti-business regulations and actions that have hampered our facility investment. Exports will pick up once Korea Inc. gains life and impetus to invest in new products and innovations.

JoongAng Ilbo, Jan. 22, Page 30
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