NABO Economic Trends & Issues (Issue No. 54)
April 27, 2017
Economic Policy Analysis Division of the Economic Analysis Office
I. Economic Trends
The Korean economy has recently shown steady growth as exports continue to improve, but growth remains restrained by weak consumption and poor labor market conditions.
Ⅱ. Impact of Household Debt Management Policy on Housing Market
Residential real estate prices rose less rapidly than forecast between the 4th quarter of 2015 and the 4th quarter of 2016; and household debt increased more rapdily than forecast. The surge in household debt shows no sign of abating despite steps taken by the government to control it, suggesting that the government will take even stronger measures in the near future. For their part, financial institutions are expected to extend fewer new loans, leading to the 4th slump in the housing market since 2000.
Ⅲ. Employment Structure in Korea
The economy is now on a moderate recovery trajectory, helping the employment rate to edge up by 1.8% YoY as of March 2017, and there is room for improvement since the increase was mainly among part-time workers. The most notable features of the labor market in Korea are discrimination among different age groups, rising self-employment, high discrepancies between the perceived and official unemployment rates, and a decline in the number of jobs created. This situation calls for more pragmatic labor policy that directly addresses Korean job seekers' needs and the nature of the employment structure.
Ⅳ. Viewing the 2017 Chinese Economic Outlook through “Liang Hui”
China’s economic policy for 2017 was revealed through “Liang Hui,” a portmanteau of the two annual meetings of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). The main objectives are to step up supply-side reforms, manage domestic risks, and maintain steady growth. The moderation of the rate of growth in China may negatively impact the Korean economy, which is heavily dependent on exports to China. China's effort to boost industrial competitiveness by reorienting growth policy and pursuing structural reform may reduce its processing trade imports of intermediate goods, and this would necessarily affect Korea’s exports to China.