Slow industrial output growth adds to worry

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Slow industrial output growth adds to worry

Industrial output grew last year at the slowest pace in two decades.

The data point is the latest to highlight the challenges faced by the Moon Jae-in government.

While December figures did indicate a significant improvement in the economy, questions remain about the strength of the recovery as the specter of the Wuhan coronavirus hovers over Korea.

According to Statistics Korea on Friday, industrial output in 2019 grew 0.4 percent. Not only is this the lowest expansion recorded since the current data was first compiled in 2000, but it is also the first time that output was up less than 1 percent.

Output in mining and manufacturing declined 0.7 percent and was the biggest drag on overall growth.

Consumer spending and investments remained unchanged.

Services grew 1.5 percent, largely in the health and welfare category in which the government has been increasing its spending. This helped cushion the declining overall output.

December figures grew sharply.

Industrial output that month grew 3.2 percent on year.

That’s the sharpest increase in 14 months. The last time industrial output grew at such a rapid pace was in October 2018, when it expanded 7.6 percent.

Manufacturing and mining grew 4.2 percent, the sharpest increase since October 2018. Consumption grew 11.1 percent in December.

On Facebook, Finance Minister Hong Nam-ki welcomed the positive news.

“Signals that the economy is improving are vividly clear,” Hong said in the post.

“All three - industrial output, consumer spending and facility investment - have increased,” the finance minister added. “Economic confidence is also improving as the consumer sentiment index that the Bank of Korea announced on Jan. 29 has reached its highest since June 2018 at 104.2.”

The finance minister raised concern about the economic impact of the Wuhan coronavirus.

“The psychological impact of the recent infection on economic participants since the beginning of this year is worrisome,” Hong said.

The finance minister said while the impact of the virus on the real economy is still limited, the government will support all policy measures to minimize the impact of the virus on the economy, including efforts to contain the outbreak.

The finance minister’s worries were echoed during the government’s macroeconomic finance meeting, which was led by the Vice Minister Kim Yong-beom.

“At this stage, it is difficult to exclude the possibility of the coronavirus infection’s direct and indirect impact on the global and local economy,” Kim said. “As our economic structure is heavily dependent on overseas factors, and as we have close relations with China economically and geographically, we will actively and preemptively monitor related situation.”

Yet the vice finance minister noted Korea’s resilience in the face of external shocks.

“In the past, the financial market showed instability during the severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome (MERS) crisis,” Kim said. “But it recovered through reinforced government countermeasures.”

Kim said Korea’s fundamentals are sound, including foreign exchange reserves, and better since earlier crises.

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

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