Gov’t warns of a bleak outlook for the economy

Finance Minister Hong Nam-ki gave a bleak projection for Korea’s exports, predicting they will likely fall for the second consecutive month, on the same day that the central bank reported that business confidence was at its lowest in two years and 10 months.

At an economic ministerial meeting held Wednesday, Hong said, “While semiconductor prices are falling and the external environment is worsening - including the trade conflict between the United States and China, this month’s exports will fail to reach the same level as the same month a year ago, as did December’s,” Hong said.

“It is most urgent to come up with measures to revitalize exports,” he continued, “which we plan to announce next month based on the discussions today.”

Korea exports actually reached a new milestone last year: For the first time ever, annual exports exceeded $600 billion. But in December, exports fell 1.2 percent compared to the previous year largely due to slowing growth in semiconductors.

That trend seems to have carried into this month. The government estimates that in the first 20 days of the month, exports fell 14.6 percent compared to a year earlier.

There have been growing concerns that exports this year will take a huge tumble.

Semiconductor exports, which accounts for more than 20 percent of all Korean exported goods, are estimated to have dropped 28.8 percent in January when compared to a year ago, while ships, another major export item, are expected to fall 40.5 percent.

The fear has deepened since China earlier this month announced its slowest economic growth in nearly three decades and the International Monetary Fund lowered its outlook for this year’s global economy.

At the meeting Wednesday, Trade, Industry and Energy Minister Sung Yun-mo offered a slightly sunnier view that exports in the second half could improve as recent declines are not a structural problem exclusive to Korea, such as local companies’ competitiveness, but the result of external factors, particularly demand. He added that other countries, including Japan, China and Taiwan, are also seeing declines in their exports.

“We plan on executing early more than 60 percent of the available resources,” Minister Sung said. “We will also focus on exporting to emerging markets in southern and northern Asia [including Russia] while expanding our financial aid, including credit guarantee limits for small- and medium-sized enterprises seeking to expand to new markets.”

Finance Minister Hong raised concerns about the weakening business sentiment, which contradicts improving consumer sentiment.

“The consumer sentiment index has gone up for two consecutive months, which is a good sign,” Hong said. “However, the business sentiment index in January for manufacturers didn’t improve and, as such, business confidence has been contracting amid sluggish investment in machinery and plants and on construction.”

According to the Bank of Korea on Wednesday, the business confidence index fell three points compared to the previous month to 69. A reading below 100 means a majority of respondents to the poll are pessimistic on the economy while a reading above 100 indicates otherwise.

The business sentiment index for this month was the lowest since March 2016, when it was at 68.

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