The Korea Herald


Korea lags behind US in key economic indicators

By KH디지털2

Published : March 20, 2017 - 11:43

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South Korea has lagged behind the United States in key economic indicators as its economy remains in the doldrums in contrast with America's full-fledged recovery, data showed Monday.

South Korea has underpeformed the world's largest economy in terms of growth for two quarters running while posting a higher unemployment rate for the first time in 16 years. In addition, the US policy interest rate is feared to overtake that of South Korea within this year as the US Federal Reserve has shifted to a tight bias.

U.S. Fed Chair Janet Yellen speaks during a news conference in Washington on March 15, 2017, after a rate hike. (AP-Yonhap) U.S. Fed Chair Janet Yellen speaks during a news conference in Washington on March 15, 2017, after a rate hike. (AP-Yonhap)

According to the data by Statistics Korea and the Organization for Economic Cooperation and Development, the US economy expanded 0.5 percent on-quarter in the October-December period of last year, edging out South Korea's 0.4 percent quarterly gain.

It marked the second consecutive quarter that America trumped Asia's fourth-largest economy in terms of economic growth. In the third quarter of last year, the US economy grew 0.9 percent on-quarter, compared with a 0.6 percent on-quarter expansion for South Korea.

Analysts paint a gloomy picture of the South Korean economy for the remainder of the year, saying its annual growth rate may fall behind that of the US basking in robust growth.

America's consumption has been posting solid growth, with its corporate investment on the rise. That contrasts with South Korea, which has been gripped by flaccid domestic demand, despite a recent rebound in exports, one of its twin growth engines.

In a global economic outlook released in November, the OECD projected the US economy to grow 2.3 percent in 2017 from a year earlier, compared with a 2.6 percent forecast for South Korea.

Some experts warn that the US may outstrip South Korea in economic growth this year as the latter remains dogged by a litany of negative factors. In the wake of a foreign exchange crisis, the South Korean economy contracted 5.5 percent on-year in 1998, compared with America's 4.4 percent gain.

Economic growth is not alone. South Korea's unemployment rate stood at 5 percent in February, a tad higher than 4.9 percent for the US It marked the first time in 16 years that Seoul posted a higher jobless rate than Washington.

Watchers said South Korea has been losing many manufacturing jobs as shipbuilding and other industries are in the midst of restructuring due to snowballing losses stemming from slumping demand and stiffer global competition.

Making matters worse, South Korean youths continue to find it hard to land jobs as large companies remain reluctant to hire new workers amid a protracted economic slowdown. The unemployment rate for people aged between 15 and 29 reached 12.3 percent last month, down slightly from a record 12.5 percent tallied a year earlier but up sharply from January's 8.6 percent.

Financial sources predict South Korea may see its policy interest rate hover below that of the US, which could make the local financial market more volatile.

Citing the strengthening labor market and a moderate rise in inflation, the Fed hiked the target range for the federal funds rate by 25 basis points to a range of 0.75 to 1 percent.

In February, the Bank of Korea held its key rate at an all-time low of 1.25 percent to bolster economic growth, marking the eighth consecutive month of a freeze.

Analysts said there will be a reversal of key interest rates should the Fed conduct two rate hikes this year as predicted amid the BOK's continued stand-pat policy.

Such a scenario could make the local financial market more unstable, but there would not be a high possibility of capital flight from South Korea, they said. (Yonhap)