NABO Economic Trends & Issues (Issue No. 53)
March 28, 2017
Economic Policy Analysis Division of the Economic Analysis Office
I. Economic Trends
The Korean economy has recently shown signs of recovery in some economic indicators such as exports and infrastructure investment, yet weak domestic demand persists with low consumption and employment as uncertainty about a recovery remains high.
Ⅱ. Characteristics and Implications of Recent Korean Exports
Exports, which recorded negative growth in 2015 and 2016, began to record double-digit growth rates for the second consecutive month in 2017, showing signs of recovery. Export businesses that have regained growth momentum are characterized by growth in main export goods, increased exports to emerging markets, and an increase in unit prices along with sales volume. As the upward export trend continues due to the overall global recovery and base effects, Korean exports are likely to make a greater contribution to the country’s growth.
Ⅲ. Characteristics and Implications of Household Income and Spending – Based on the 2016 Report on Household Income and Expenditure survey by Statistics Korea
Recently, the increase in household incomes has slowed and already weakened consumer spending is deteriorating. The main factors behind such trends include weaker corporate-to-household income flows, low profitability of self-owned businesses, surging household debt and a slowdown in property income increases. Weakened household income may compromise the foundation for domestic demand by crippling household income capacity, incurring a domestic investment slump and have a negative impact on economic growth.
Ⅳ. Discussion on Inclusive Growth at the World Economic Forum (WEF)
Since the outbreak of the global financial crisis, institutions such as the OECD, IMF and WEF have been discussing the issue of “inclusive growth” to address the aggravation of low growth and income inequality. Among a number of pillars used as a criteria, the WEF determined that Korea lacks the institutional environment to enable inclusive growth in terms of ‘corruption and rents,’ and‘employment and labor compensation.’Discussions need to be held on growth strategies including the issue of inclusive growth, to ensure the sustainable growth of the Korean economy.
Ⅴ. European Economic Trends and a Stocktaking of Risk Factors
The European economy has recently been on a recovery trajectory, which is expected to continue backed by factors such as an improved labor market, normalization of inflation and a stimulus package. However, risk factors remain such as Brexit, Italy’s banking crisis, political risks in major European countries and the threat of another fiscal crisis in Greece. As such, these factors need to be closely monitored.