Economic outlook much gloomier next year
The country's economic outlook for next year is bleaker. Last week, the Organization for Economic Cooperation and Development (OECD) revised down its 2023 growth projection for South Korea to 1.8 percent from its previous forecast of 2.2 percent. The figure is much lower than this year's expected growth rate of 2.7 percent.
There is no doubt that Korea, Asia's fourth-largest economy, is losing its growth momentum at an alarming rate. A fear of stagflation, a simultaneous phenomenon of stagnation and inflation, is likely to become a reality amid soaring prices, higher interest rates and the global economic slump.
It is discouraging that the OECD lowered Korea's outlook while the Paris-based club of rich countries left its global growth projection for next year unchanged at 2.2 percent. This shows that the export-oriented Korean economy is more vulnerable to negative factors such as global monetary tightening and higher prices of oil and other natural resources.
The Korean economy is also bearing the brunt of the prolonged Russian war with Ukraine, the escalating great power competition between the U.S. and China and America's growing trade protectionism. China's slower growth is also one of the biggest challenges Korea faces. Domestically, brewing political conflicts between the ruling and opposition camps are weighing the economy down.
Most of all, falling exports are dealing a severe blow to the economy. The country's overseas shipments shrank 16.7 percent year-on-year in the first 20 days of November. The drop was led by chip exports which plunged by nearly 30 percent. This is a cause for concern because the semiconductor industry accounts for 20 percent of the country's exports. Other export items such as steel, ships and mobile devices also suffered setbacks. Making matters worse, shipments to China, Korea's largest trading partner, nosedived by 28 percent.
The country's exports are on an eight-month downward march. Its trade deficit is predicted to snowball to $40 billion this year, the largest since the country was hit by the 2008 global financial crisis. Even worse, exports are forecast to decline 3.1 percent next year with the trade shortfall showing no signs of decreasing.
The country cannot revive its economy without increasing exports. That's why President Yoon Suk-yeol presided over a conference to work out a new export strategy last Wednesday. The government and businesses should work together to beef up export industries by boosting their productivity and competitiveness. Companies need to take the lead in their technology prowess and product quality to dominate the global markets. It is also imperative for the country to diversify its export markets to reduce its excessive reliance on China.
It is equally important for the National Assembly to enact laws such as a special semiconductor industry development bill in order to provide more support for exporters. Structural reforms are imperative to stave off looming economic woes. It is also urgent to speed up deregulation, encourage innovation and promote entrepreneurship to revive growth momentum.
The country's economic outlook for next year is bleaker. Last week, the Organization for Economic Cooperation and Development (OECD) revised down its 2023 growth projection for South Korea to 1.8 percent from its previous forecast of 2.2 percent. The figure is much lower than this year's expected growth rate of 2.7 percent.
There is no doubt that Korea, Asia's fourth-largest economy, is losing its growth momentum at an alarming rate. A fear of stagflation, a simultaneous phenomenon of stagnation and inflation, is likely to become a reality amid soaring prices, higher interest rates and the global economic slump.
It is discouraging that the OECD lowered Korea's outlook while the Paris-based club of rich countries left its global growth projection for next year unchanged at 2.2 percent. This shows that the export-oriented Korean economy is more vulnerable to negative factors such as global monetary tightening and higher prices of oil and other natural resources.
The Korean economy is also bearing the brunt of the prolonged Russian war with Ukraine, the escalating great power competition between the U.S. and China and America's growing trade protectionism. China's slower growth is also one of the biggest challenges Korea faces. Domestically, brewing political conflicts between the ruling and opposition camps are weighing the economy down.
Most of all, falling exports are dealing a severe blow to the economy. The country's overseas shipments shrank 16.7 percent year-on-year in the first 20 days of November. The drop was led by chip exports which plunged by nearly 30 percent. This is a cause for concern because the semiconductor industry accounts for 20 percent of the country's exports. Other export items such as steel, ships and mobile devices also suffered setbacks. Making matters worse, shipments to China, Korea's largest trading partner, nosedived by 28 percent.
The country's exports are on an eight-month downward march. Its trade deficit is predicted to snowball to $40 billion this year, the largest since the country was hit by the 2008 global financial crisis. Even worse, exports are forecast to decline 3.1 percent next year with the trade shortfall showing no signs of decreasing.
The country cannot revive its economy without increasing exports. That's why President Yoon Suk-yeol presided over a conference to work out a new export strategy last Wednesday. The government and businesses should work together to beef up export industries by boosting their productivity and competitiveness. Companies need to take the lead in their technology prowess and product quality to dominate the global markets. It is also imperative for the country to diversify its export markets to reduce its excessive reliance on China.
It is equally important for the National Assembly to enact laws such as a special semiconductor industry development bill in order to provide more support for exporters. Structural reforms are imperative to stave off looming economic woes. It is also urgent to speed up deregulation, encourage innovation and promote entrepreneurship to revive growth momentum.
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