Falling investment behind S. Korea economic slowdown: Experts
- 5 years ago
한국 경제성장률 잇따라 하향 조정...그 이유는?
An economic growth rate reflects how a country is doing in terms of producing goods and services.
This month, major organizations at home and abroad have cut their projections for South Korea.
Our Ko Roon-hee delves deeper to find out why.
At the start of the year,... there were high hopes that South Korea would achieve economic growth of three percent.
Behind that would be the government's policies of people-centered growth led by rising incomes.
But now that target is inching farther away.
Major organizations at home and abroad have cut their growth forecasts.
Moody's Investors Service estimated earlier this month that Korea's economy will expand this year by only 2-point-5 percent,... down sharply from its previous forecast of 2-point-8 percent.
Korea Development Institute, the nation's leading think tank, also trimmed its growth outlook from 2-point-9 percent down to 2-point-7 percent,... pointing to low domestic demand.
Domestic demand refers to the country's private consumption, public expenditure and business investment.
And among the three, data show that business investment is especially low.
According to Statistics Korea, investment in equipment fell for six straight months through August... though it rebounded in September.
Some blame government policies such as a higher minimum wage and limits on working hours.
"Minimum wage increases in the past were between seven to eight percent. But now it's nearly twice that. Instead of thinking about where to invest, companies are busy dealing with the changes."
In 2020, small and medium companies will also have to follow the 52-hour work-week limit.
Some experts say the side effects could be mitigated by a system of flexible working hours.
"Flexible work hours can minimize the side effects of the tighter limit. For instance, if some companies can't meet the limit week-in, week-out, they could be allowed to spread the hours over a longer period of time."
The flexible work system aims to help firms optimise their workforce... by letting them work more during busy periods and less when things are slow,... as long as the average over a three-month period comes to 52 hours a week.
But businesses say three months isn't enough to make up for lost productivity,... especially when SMEs are already reeling from a chronic labor shortage... and the minimum wage hikes.
Ko Roon-hee, Arirang News.
An economic growth rate reflects how a country is doing in terms of producing goods and services.
This month, major organizations at home and abroad have cut their projections for South Korea.
Our Ko Roon-hee delves deeper to find out why.
At the start of the year,... there were high hopes that South Korea would achieve economic growth of three percent.
Behind that would be the government's policies of people-centered growth led by rising incomes.
But now that target is inching farther away.
Major organizations at home and abroad have cut their growth forecasts.
Moody's Investors Service estimated earlier this month that Korea's economy will expand this year by only 2-point-5 percent,... down sharply from its previous forecast of 2-point-8 percent.
Korea Development Institute, the nation's leading think tank, also trimmed its growth outlook from 2-point-9 percent down to 2-point-7 percent,... pointing to low domestic demand.
Domestic demand refers to the country's private consumption, public expenditure and business investment.
And among the three, data show that business investment is especially low.
According to Statistics Korea, investment in equipment fell for six straight months through August... though it rebounded in September.
Some blame government policies such as a higher minimum wage and limits on working hours.
"Minimum wage increases in the past were between seven to eight percent. But now it's nearly twice that. Instead of thinking about where to invest, companies are busy dealing with the changes."
In 2020, small and medium companies will also have to follow the 52-hour work-week limit.
Some experts say the side effects could be mitigated by a system of flexible working hours.
"Flexible work hours can minimize the side effects of the tighter limit. For instance, if some companies can't meet the limit week-in, week-out, they could be allowed to spread the hours over a longer period of time."
The flexible work system aims to help firms optimise their workforce... by letting them work more during busy periods and less when things are slow,... as long as the average over a three-month period comes to 52 hours a week.
But businesses say three months isn't enough to make up for lost productivity,... especially when SMEs are already reeling from a chronic labor shortage... and the minimum wage hikes.
Ko Roon-hee, Arirang News.