South Korea’s economy expanded at its slowest pace for a decade last year, hampered by prolonged trade tensions between the US and China and the sluggish semiconductor market, the central bank said Wednesday.
The world’s 12th-largest economy grew 2.0% in 2019, down from 2.7% the previous year and the worst performance since 2009 in the wake of the global financial crisis.
Slowing growth presents a challenge for the South, which enjoyed a decades-long boom known as the “Miracle on the Han” but where a highly educated youth now struggles to find well-paid jobs and frustration is mounting over inequality.
President Moon Jae-in has been criticized for a controversial economic policy featuring public spending increases and the concept of “income-led growth,” which has seen the minimum wage rise more than 30% in three years. Opponents say it hurts those it is intended to help by raising employment costs.
The trade-dependent economy slowed “due to factors such as a decrease in semiconductor prices,” the Bank of Korea said in a statement.
“While the growth of government consumption expanded, construction and facilities investment contracted as private consumption expenditure and export growth slowed,” it said.
Under pressure from the China-US trade row, outbound shipments grew 1.5%, compared with 3.5% a year earlier and the smallest expansion since 2015. Imports fell 0.6%.
Growth in the fourth quarter was higher at 2.2% year-on-year, the BOK said, boosted by government spending to offset weaker private consumption growth, which rose by 1.9% last year, its slowest in six years.
Moon’s administration is set to raise public spending 9.1% this year and spend 30% of its infrastructure budget in the first quarter, ahead of parliamentary elections scheduled for April.