Green Book Missing 'Slump' Expression for Three Months... Government Supports Bottom-Out Theory (Comprehensive)

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

Hong Min-seok, Head of the Economic Analysis Division at the Ministry of Economy and Finance (center), is conducting a background briefing on the 'Recent Economic Trends as of January 2020' at the Government Complex Sejong on the 17th. (Photo by Ministry of Economy and Finance)

[Sejong=Asia Economy reporters Kim Hyunjung and Joo Sangdon] The government is reinforcing the 'economic bottoming-out theory' by mentioning the increase in service sector production and consumption as well as improvements in facility investment. Regarding the previously identified constraints on our economic growth?export and construction investment sluggishness?it diagnosed these as an 'adjustment phase.' However, it also noted that there are many external variables to confirm, such as the developments in 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 sector 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 had continued for seven months from the April to October issues last year, disappeared for the third consecutive month 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 figures) also decreased by 3.7% year-on-year and 6% quarter-on-quarter as of the third quarter 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.

The Ministry of Economy and Finance explained that related indicators have shown improvement trends since the beginning of this month. According to the ministry's data, export performance from the 1st to the 10th of this month increased by 5.3% compared to the previous year. Hong Minseok, head of the Economic Analysis Division at the ministry, explained, "Due to the Lunar New Year holiday this year, the number of working days is 2.5 days fewer than last year, so a full positive turnaround in overall performance is not easy, but considering this trend, a positive shift on a daily average basis is possible."

When asked about the judgment on the 'bottoming-out theory' of the current economic situation, he said, "It can only be discussed retrospectively," adding, "It is difficult to definitively say 'this is the bottom and the economy will break through and rise' at this moment." However, he forecasted, "The leading index has risen for three consecutive months, and December's increase was significant. If there are no additional external shocks, the economy is expected to rise thereafter."

Regarding external conditions that could affect the domestic economy, the US-China trade negotiations were repeatedly mentioned. Despite signs of improvement in the global manufacturing sector, the signing of the phase one US-China trade agreement, and growing expectations for semiconductor industry recovery, uncertainties remain due to the future developments of the US-China negotiations, the strength of the semiconductor market recovery, and geopolitical risks in the Middle East.

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

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 implementing tasks to boost investment, consumption, and export vitality reflected in the 2020 Economic Policy Direction."

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