By Yoon Ja-young
The country’s real income grew at the weakest pace in two-and-a-half years, economists said Thursday, due to the economic slowdown and sluggish investment. They advised the government to focus on increasing the income of the households to boost the economy.
According to the Bank of Korea, the real gross national income (GNI) increased by 0.3 percent in the third quarter from the previous quarter, the smallest increase since the first quarter of 2012. The real GNI grew 1.9 percent in the second quarter of last year, but the growth rate fell to 1 percent in the third and fourth quarters and to 0.5 percent in the first quarter of this year. It picked up to 1.1 percent in the second quarter, but fell to 0.3 percent in the third quarter.
Unlike real gross domestic income (GDI) that focuses on economic activities within the country, the real GNI shows real purchasing power of the income earned by Koreans both inside and outside the country.
The central bank attributed the fall in the real income to the worsening trade conditions. Semiconductors, electronic goods and steel saw raw materials import prices rise more steeply than export prices of finished goods.
The government-run Korea Development Institute (KDI) also said in a report Thursday that the country’s economy is seeing growth decreasing.
“Production in mining and manufacturing is decreasing. The average operation rate of the manufacturing sector is a mere 73.5 percent,” the KDI said in the report.
“The retail sales index started to fall as did the consumer sentiment index. They reflect that the total demand in the economy is slowing,” it said, adding that exports to major trading partners, except the United States, have also decreased.
Park Jong-kyu, a senior research fellow at the Korea Institute of Finance, points out that the country is suffering “wageless growth.”
“As the household income isn’t increasing, the government’s monetary easing isn’t helping boost the real economy,” he said.
The researcher pointed out that though labor productivity has increased during the past few years, real wage has been stagnant. “Korea has the biggest gap between these two among the Organization for Economic Cooperation and Development member countries. As the household economy isn’t improving, they can’t consume. The economy is losing vitality,” Park said.
He pointed out that Japan is seeing a real wage decrease. “Even if they keep the key rate at zero percent, they can’t boost the domestic economy. They ended up in deflation.”
He advised the government to focus on increasing household income.