Moon administration's misstep and the harsh reality
of the Korean economy
https://diamond.jp/articles/-/204925
2019.6.11 Makio Akio: Professor, Graduate School of Hosei University
MoonAdministration'sMisstep & HarshRealityEconomy2
MoonAdministration'sMisstep & HarshRealityEconomy1
한국 '원'의 하락이 나타내는 문 정권의 실책과 한국 경제의 어려운 현실
한국 '원'의 하락이 나타내는 문 정권의 실책과 한국 경제의 어려운 현실2
「ウォン」の下落が示す ムン政権の失策と韓国経済の厳しい現実
「ウォン」の下落が示す ムン政権の失策と韓国経済の厳しい現実2
Uncertainty in the future is leading to a weaker won
Since late April , the Korean currency
“ won ” has fallen against the US dollar and the yen .
Among the Asian currencies,
the depreciation of the won is noticeable along with the yuan .
Some market participants
"The won is likely to be sold reflecting the political,
economic and geopolitical risks."
There are many voices to point out.
So far, in Korea, with the backing of the government,
a baili company has made a huge capital investment,
and has achieved economic growth by purchasing materials
from abroad and producing and exporting automobiles and semiconductors.
The weak won “boosts” the profits of the bait companies,
boosting Korea ’s GDP growth rate.
However, despite the depreciation of the won,
exports have now been braked .
China's economy, Korea's largest export destination,
has reached its investment-dependent growth limit .
In addition,
the content of the business operations of the baiting enterprises
that have substantially controlled the Korean economy is also deteriorating .
Korea's economic management seems to be facing a very difficult situation.
Such unrest has led to the depreciation of the won.
From now on, there is a possibility that the part
where the won depreciation works negatively to the economy will increase.
President Moon Jae-in emphasizes fiscal spending
to maintain the approval rating.
South Korea's politics and economy will face even more severe conditions
if fiscal conditions deteriorate
while the economic stagnation risk is rising .
It has unignorable influence on the Far East situation
such as destabilization of the Korean peninsula situation.
Korea's economy is getting tougher
The Korean economy faces tougher conditions than expected .
Deterioration of the economic environment
is also raising concerns over political stagnation.
That is linked to won's depreciation .
South Korea 's real GDP growth rate was -0.4 %
in the January - March quarter .
Initially, economic experts expected
the Korean economy to maintain positive growth.
That is why the magnitude of negative growth rush is large.
The growth rate for the January-March quarter was announced
to be minus 0.3% from the October-December period last year .
It is minus 1.2% when it converts in annual rate
which is the growth rate statistical method of the United States .
It means that Korea was greatly back when Korea ran short.
If you check the GDP growth rate for each demand item,
you can clearly see the situation in which the Korean economy is in place.
The current condition of the Korean economy is
the government's spending .
On the other hand, the business conditions of the baiting enterprises
that have been driving economic growth so far are deteriorating rapidly.
Final consumption expenditure increased 0.2 % from the previous year,
supported by government spending.
Investment (total fixed capital formation) decreased 2.8 % QoQ .
Looking at the breakdown, capital investment fell sharply by 9.1 % .
Exports also fell 3.2 % YoY .
Global trade has fallen sharply since the middle of last year.
That led to a decline in Korea's exports.
As a result, Korea's current account slipped into the red in April .
If the friction between the United States and China is intensified
and prolonged, trade will stagnate further .
If you think so, the current account deficit fall can not be neglected.
Another factor behind the fall in the current account deficit is the payment
of dividends overseas.
Korean companies pay dividends to foreign investors every April ,
and Korea's current account tends to be smaller than other months
due to the decline in income balance.
Concerns over declining exports have led
South Korean zaibatsu companies to squeeze capital investment .
Samsung has already reduced its investment plan
for NAND flash memory and is cautious about additional investment.
The Moon administration is trying to support private sector capital investment,
but it is difficult for Samsung to respond.
Summarizing the above, the growth model of Korea's economy,
in which a bastard company invests in equipment to increase
the production capacity of semiconductors, exports products and earns profits,
is stalled .
The decrease in exports will reduce the money Korea receives from abroad.
It is natural for investors to sell won in the foreign exchange market.
Outflow of funds affected by political unrest
Unrest on politics has also lowered the won .
Political stability is essential to economic stability.
Looking back on our politics, we can clearly see that politics are essential
for economic stability.
The former Democratic Party administration from September 2009
to November 2012 stated “political initiative”
despite having no experience in policy management.
As a result, the government did not control bureaucracy well,
and the economy stagnated.
Currently,
President Moon is raising the anxiety of business owners and investors.
Moon 's economic policy has made the Korean economy worse .
His increase in minimum wages has put a strain on businesses
and led to a decline in employment.
The unemployment rate for young people is getting worse,
and the unemployment rate for people aged 15 to 29 exceeded 11 %.
Many Korean young people have no hope for the future and are looking
for opportunities overseas such as Japan.
Major companies are also expanding overseas such as Vietnam because
of the avoidance of friction between the United States and China.
As a result, concerns over the long-term stagnation
of the Korean economy are rising .
On the other hand, the union is making a strike
for wage increases and so on.
That would make Korea's income and employment situation worse .
In addition, rising crude oil prices and a weaker won
may push up import prices,
and Korean private consumption may follow a downward trend .
Already,
hereditary management of some zaibatsu companies has reached its limit,
and management has fallen into a crisis situation in Lake Biwa Asiana etc.
Foreign investors sell Korean stocks because of risk aversion,
which is spurring a weaker won.
If China's economy slows down sharply ,
Korea's stock depreciation and won depreciation will gain momentum .
Due to the deterioration of the economic environment,
it is also difficult for the Moon administration to carry out structural reforms
that impose a temporary burden on the people.
At the same time, even if the Bun administration has not done anything,
public opinion will continue to criticize the administration
for not sharing the wealth fairly and the concentration of economic powe
r on the founders of the zaibatsu.
It is also difficult for Korea to aim for the resumption
of the “Japanese-Korean currency swap agreement,”
which is a safety valve of the economy,
while the worst post-war Japan-Korea relationship is further confusing.
Indeed, President Moon has fallen into the situation of Thereis no way out .
For the time being, the outflow from Korea will continue .
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