South Korea’s economy is showing some signs of recovery mainly on the back of solid exports, according to data released last week.
The country’s exports increased 16.6 percent from a year earlier to $53.8 billion in March, extending the streak of growth to five consecutive months, showed figures from the Ministry of Trade, Industry and Energy. The growth was largely led by a rise in shipments of chips, cars and bio-health products. In particular, chips accounted for nearly 20 percent of Korea’s exports last month.
The Industrial output of Asia’s fourth-largest economy expanded 2.1 percent on-month in February, turning around from a 0.6 percent decline in January, according to separate data released by Statistics Korea. It marked the fastest on-month gain since June 2020.
President Moon Jae-in and his economic team seem buoyed by the upward indicators.
Moon recently wrote on Twitter that the country’s economic recovery would be accelerated. Finance Minister Hong Nam-ki, who doubles as deputy prime minister for economic affairs, said last week the blinker of hope had been turned on.
But it is still too early to be confident that Korea’s economy is on the path to a full-fledged recovery.
Private spending remained fragile amid a resurgence of COVID-19 cases. Retail sales shed 0.8 percent from a month earlier in February. Facility investment also shrank 2.5 percent on-month in February.
There are factors that could push Korea’s economy back into a downturn. The snail-paced vaccination against the coronavirus amid the prolonged pandemic crisis raises concerns that Korea might be left behind other major economies in restoring business activities. Disruptions in global chip supplies might push down the country’s outbound shipments and industrial output.
Furthermore, the recent improvement in some indicators has little to do with the policy pursued by the Moon administration since it assumed office in 2017. It has dampened corporate activity by imposing stricter regulations on companies and implementing pro-labor measures such as steep minimum wage hikes and inflexible limits on overtime.
Since late last year, Moon has repeatedly pledged to help form more corporate-friendly conditions. But he has been lukewarm in turning his rhetoric into substantial actions. He has done little to prevent ruling party lawmakers from having passed a raft of bills designed to impose additional regulatory restrictions on companies.
A recent study by a local research institute pointed to the weakening global competitiveness of Korea’s major firms. The number of Korean companies among the world’s 500 largest enterprises decreased to 14 in 2020 from 16 in the previous year, while the figures for China and Japan rose by five and one to 124 and 53, respectively.
Over the cited period, Korean firms’ proportion of the total turnover by the world’s 500 biggest companies fell from 2.8 percent to 2.4 percent. The shares of US and Chinese companies increased each from 28.8 percent and 24.2 percent to 29.5 percent and 24.9 percent.
It is not the time to be too optimistic about the recovery of Korea’s economy without exerting efforts to shore up corporate activity. The Moon administration should go all out to accelerate deregulation and secure coronavirus vaccines rather than trumpeting about improvements in some economic indicators.
In a speech at an event hosted by the Korea Chamber of Commerce and Industry on Wednesday, Moon vowed that his government would hold consultations with the business community on a regular basis to listen to difficulties facing corporations and seek solutions to them. It has yet to be seen whether his latest pro-corporate message will lead to substantial changes in his administration’s relationship with the business circle. Some critics note his speech was aimed at affecting moderate and middle-class voters’ sentiment in favor of ruling party candidates ahead of key mayoral by-elections this week.
If his rhetoric does not translate into concrete measures this time, too, the business community might no longer pin hopes on the possibility of the Moon government turning to a corporate-friendly position. Under this circumstance, a full-fledged economic recovery would remain out of reach even if the pandemic crisis was put under control.
In a recent survey of 109 local firms, conducted by the Korea Enterprises Federation, 94 percent of the respondents said there existed widespread anti-business sentiment in Korean society. Moon should see to it that the proportion will be meaningfully lowered by the time he leaves office slightly over a year from now.