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Minus growth in ten important South Korean economic indicators

The Federation of Korean Industries (FKI) found the foundation of the South Korean economy is collapsing, citing minus growth rate figures for ten major indicators including production, exports, consumption, and investment.

The group, which represents the interests of South Korea’s major chaebol, also said the crisis has been in full swing for at least five years. Its position is now expected to have an impact on the upcoming parliamentary elections in April, where fears of economic crisis are surfacing as a major issue.

In a document released on Mar. 6 under the title “Minus Economic Indicators Increase for South Korean Economy in Crisis,” FKI noted minus figures for the growth rate in industry labor productivity - indicating hourly production or value added per worker - for eleven straight quarters since 1Q13, when the Park Geun-hye administration took office. The average operation ratio for the manufacturing sector also slid for four straight years from 80.5% in 2011, the fourth year of Park’s predecessor Lee Myung-bak’s term, to 74.2% in 2015, its lowest level since recording 67.6% during the foreign exchange crisis in 1998.

Sales growth rates were also negative for the country’s top 30 companies in terms of sales - typically seen as competitive in the global market - for six straight quarters since 2Q14 during Park’s second year in office.

A dip in export volumes continued from Jan. 2015 (-0.4%) through Feb. 2016 (-12.2%), a run of 14 consecutive months. The export unit value index (the price of exports per unit weight) fell steadily from 108.4% of its 2010 level in Aug. 2011 to 77.8% in Jan. 2016, its lowest level since statistics were first kept in 1988. The contribution of net exports to economic growth similarly showed negative growth levels between the first and fourth quarters of 2015.

The growth rate for private consumption, which accounts for half of gross domestic product (GDP), remained at a low level of around 2% for four straight years between 2012 (year five of the Lee administration) and 2015. The consumer sentiment index fell from 109 out of a benchmark value of 100 during the second year of Park’s term in Feb. 2014 to 98 as of Feb. 2016.

The total domestic investment ratio remained under 30% for three straight years from 2013 to 2015. The key economically active 25-to-49-year-old age group among the productive population aged 15 to 64, which first entered a decline in 1985, shrank by -1.8% in 2010.

“To escape the crisis confronting the South Korean economy, we need structural and other labor reforms and efforts to establish new growth engines,” said Song Won-geun, head of FKI’s economic research division.

By Kwak Jung-soo, business correspondent

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