The Green Book, with 'Poor Performance' Expression Missing for Three Months... Government Supports Bottom-Out Theory

Ministry of Economy and Finance Publishes January Economic Trends
Exports and Construction Investment Previously Cited as 'Growth Constraints' Now Diagnosed as 'Adjustment Phase'

[Sejong=Asia Economy Reporter Kim Hyun-jung] The government is reinforcing the "economic bottoming-out theory" by mentioning the increase in service industry production and consumption as well as improvements in facility investment. Regarding the sluggish exports and construction investment, which were previously identified as constraints on our economic growth, it diagnosed them as being in an "adjustment phase." However, it also noted that there are many external variables to confirm, such as the progress of the US-China trade negotiations and the strength of the semiconductor market recovery.

On the 17th, the Ministry of Economy and Finance stated in the "Recent Economic Trends January Issue (Green Book)" that "Recently, our economy has seen a gradual increase in service industry production and consumption, and facility investment is gradually recovering from sluggishness, but exports and construction investment remain in an adjustment phase."

The most notable point is that the expression of "sluggishness" regarding the economy, which continued for seven months from the April to October issues last year, has disappeared for three consecutive months since November, replaced by positive assessments such as "gradual increase" and "recovering from sluggishness." In particular, the status of exports and construction investment, which were evaluated as growth-limiting factors last month, was described as "continuing adjustment phase."

However, the indicators still show a flow close to sluggishness. December exports (provisional), mentioned as being in the "adjustment phase," recorded $45.72 billion, down 5.2% year-on-year, and construction investment (GDP provisional) also decreased by 3.7% year-on-year and 6% quarter-on-quarter as of the third quarter of last year. Regarding the construction sector, the Green Book anticipated that increases in construction orders would be positive factors for future construction performance, but decreases in building permit areas and pre-sale volumes would act as negative factors.

Regarding external conditions that could affect the domestic economy, the US-China trade negotiations were repeatedly mentioned. Amid signs of improvement in the global manufacturing economy, the signing of the Phase 1 US-China trade agreement has taken place, and expectations for semiconductor industry recovery have formed; however, uncertainties remain due to the future progress of US-China negotiations, the strength of semiconductor market recovery, and geopolitical risks in the Middle East.

In December, the stock market rose with the anticipation of the Phase 1 US-China trade agreement, reduced Brexit uncertainties, and expectations for semiconductor industry recovery, with the KOSDAQ and KOSPI indices increasing by 5.26% and 5.81%, respectively, compared to the end of the previous month. The won-dollar exchange rate also declined (strengthened) due to risk appetite influenced by optimism over the US-China trade negotiations. The won-dollar exchange rate at the end of December (closing price) was 1,156.4 won, appreciating by 2.1% compared to the end of the previous month. Treasury bond yields also showed an upward trend, especially in long-term bonds, for the same reasons. The 10-year treasury bond yield rose by 5 basis points compared to the previous month, while the 20-year and 30-year yields increased by 10 basis points and 13 basis points, respectively.

The government plans to focus on economic recovery through the implementation of the 2020 Economic Policy Direction. The Ministry of Economy and Finance stated, "While thoroughly managing risks, the government will make every effort to swiftly establish momentum for economic recovery by rapidly promoting tasks to revitalize investment, consumption, and exports reflected in the 2020 Economic Policy Direction."

This content was produced with the assistance of AI translation services.