By Kim Deok-hyun
SEOUL, May 8 (Yonhap) -- Sluggish outbound shipments and the drawn-out global trade war between the U.S. and China could not have come at a worse time for President Moon Jae-in, whose key economic policies at home have not yet delivered the desired results.
His signature income-led growth strategy, among other policy moves, has lagged expectations and failed to avoid negative impacts on employment growth, particularly for the self-employed business sector.
Narrowing the income gap between haves and have-nots is also one of the most urgent tasks facing Moon's economic policy team.
South Korea's per capita income has surpassed the $30,000 mark, the latest milestone in the country's meteoric rise from one of the world's poorest nations to one of the richest in just a few decades.
But the gap between rich and poor is getting wider as the nation's economy continues its push toward meeting the demands of globalization.
Further exacerbating economic troubles, Asia's fourth-largest economy backtracked an estimated 0.3 percent in the first quarter from three months earlier on falling exports and weak capital spending. The quarterly results were the worst performance since the 2008 global financial crisis.
The National Assembly is stuck in limbo as well, clouding prospects for the passage of a 6.7 trillion-won (US$5.8 billion) supplementary budget bill that the Moon administration is seeking in a bid to boost the economy. Moon's ruling Democratic Party holds about 43 percent of the 300-seat parliament.
"Downside risks remain for South Korea as the country experiences lackluster export performance and poor employment growth, though there are a few signs of stabilization," Moody's Analytics said.
Experts have voiced worries that the nation's other flagship industries, including auto, smartphone and shipbuilding, have seen their competitiveness weaken.
"After a robust performance in the three years to 2017, Korean companies are entering a credit downcycle -- albeit a moderate one," said S&P Global Ratings credit analyst Park Jun-hong in a report.
Park said Korean companies will also face the hurdles of slowing demand in key sectors, such as semiconductors, smartphones, and auto, amid trade tensions and fears over protectionism.
Some analysts said the government ought to propose a bigger fiscal measure, given uncertain economic conditions overseas.
"The fiscal stimulus was forecast to boost national economic growth by just 0.1 percentage point, too low for a meaningful impact," Moody's Analytics said in a weekly report.
"There is an argument for an even bigger fiscal push, partly because the pressure is mounting on Moon to deliver on his promise of an internal growth, which is needed now more than ever given uncertain external economic conditions," it said.
The Moon administration is now focusing prodding companies to spend more, thus creating jobs while pitching for an innovation-led growth strategy as well.
During a recent meeting with senior aides, Moon acknowledged that South Korean firms must innovate to keep their edge to offset challenges from global rivals.
"More than anything else, the creation of future growth engines through new industries is crucial. The key is transforming the fast-follower model economy into a pace-setting one," Moon said.
"To this end, the government has focused on fostering new industries. To innovate economic fundamentals and the ecosystem, it has pushed for strategies to nurture the four major elements of the platform economy -- data, artificial intelligence, the hydrogen economy and 5G technology -- as well as the eight leading industries, including biohealth, smart factories, smart farms, fintech and drones," Moon said.
Late last month, the government charted out its economic vision by designated non-memory chips, biohealth and future cars as three key industries to be nurtured intensively and, thus, prioritized for support.
Moon said the government will provide full policy support to help these areas emerge as the three mainstays of our economy's new growth engines.
Moon made his first visit to a local factory of Samsung Electronics Co. since taking office, in a move to demonstrate the government's resolve to promote non-memory chips.
Samsung Electronics and SK hynix Inc. recently announced they will invest 133 trillion won and 120 trillion won, respectively, to build chip plants.
Moon welcomed the huge investment plans, saying "private investment needs to be revived to reinvigorate the economy."
"I urge the government to do its best as well to create an environment conducive to corporate investment. To this end, it will be necessary to redouble efforts to address investment-related difficulties by actively engaging in on-site communication with businesses as well as to identify and support new corporate investment projects," Moon said.
"Regulatory innovation, to which the government is devoting itself, is also inevitable to boost corporate investment," Moon said.
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