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Analysts say 'jobless growth becomes more evident'
By Yoon Ja-young
The imbalance in the Korean economy is deepening as record-high exports are failing to sustain faltering domestic investment and consumption.
This indicates that booming exports in a few industries, such as semiconductors, have not led to growth in corporate investment, consumer spending and employment.
According to the Ministry of Trade, Industry and Energy, the country's exports totaled $51.2 billion in August, up 8.7 percent from a year ago. Exports so far this year have increased 6.6 percent to $399.8 billion, the highest ever.
This is in stark contrast to the fact that economic indices in jobs, investment and domestic demand are deteriorating.
Statistics Korea said Friday that facility investment dropped 0.6 percent in July for the fifth month in row, the longest losing streak since the 1997-1998 financial crisis.
Job indices are also in dismal condition. The number of newly added jobs contracted to 5,000 in July, the worst in eight-and-a-half years. The number of the unemployed, meanwhile, has been hovering above 1 million for seven consecutive months.
Both consumer and corporate sentiment are cooling rapidly. According to Bank of Korea, its business survey index marked 74 in August, the lowest since February last year. The composite consumer sentiment index also dropped to 99.2, the lowest since March last year.
Experts point out that only industries without much trickledown effect on the domestic economy are leading the boom in exports.
Semiconductors, for instance, make up 22.4 percent of the country's total exports, but don't contribute to job or domestic consumption as much. Exports of semiconductors jumped 31.5 percent to a record high $11.5 billion, surpassing the $10 billion mark for the fourth consecutive month.
Petrochemicals also saw a 17 percent increase in exports, marking a record-high $4.3 billion. They have been hovering above $4 billion for nine months in row.
However, these industries are not labor dependent.
"Technology is being developed to decrease jobs, with machines substituting for human labor. As businesses expand their facilities overseas, jobless growth is becoming more evident," said Park Jin, a professor at the Korea Development Institute (KDI) School of Public Policy and Management.
According to a report by the Bank of Korea, 1 billion won in exports led to mere 7.7 jobs in 2014, which is half of 15 jobs created in 2000.
Automobiles, home electronics, and shipbuilders, which contribute relatively more to jobs, meanwhile, are sluggish. Exports of automobiles inched up 0.5 percent, while exports of home electronics dropped 25.2 percent and shipbuilders plunged 71.8 percent.
The government expects exports to continue the upward trend thanks to favorable external conditions, such as booming manufacturing in major economies including the United States and the EU, as well as rising export prices following a global oil price hike.
"Exports are expected to continue 5 percent growth on average in the latter half of the year. It is thus likely to surpass $600 billion for the first time in 2018," said Trade, Industry and Energy Minister Paik Un-gyu.
However, the country's overdependence on the semiconductor industry means the economy could collapse if it heads down after hitting a peak.
The country marked 3.1 percent economic growth last year, and semiconductors are estimated to have contributed 0.4 percentage points to the figure. It contributed to 20 percent of Korea's exports and facility investment, as well as 25 percent of corporate earnings last year.
Kim Soo-hyung, a researcher at the Hyundai Research Institute, said Korea should diversify both export markets and products.
"Even if certain exports or products begin to struggle, the negative impact should not expand to the whole economy."
He added that there should be efforts to open up new markets.
"The government should induce investment into new products and markets that are newly rising on the Fourth Industrial Revolution. The country should take the leadership in high value-added goods."
