Economy Undergoing the Longest Ever Downturn
The South Korean government officially announced on Sept. 20 that the South Korean economy hit its latest peak in September 2017, which means a downtrend began after President Moon Jae-in took office. Some experts are pointing out that the Moon Jae-in administration is accelerating the downtrend with its policies such as a higher corporate tax rate and a rapid increase in minimum wage. The downtrend has continued for 24 months in a row and is forecast to continue for at least 29 months, the longest ever, if the current pace continues.
“The peak of the 11th business cycle was in September 2017 and the South Korean economy has deteriorated since then,” Statistics Korea explained, adding, “During the period, the economy has been affected by worsening external conditions such as last year’s global economic recession and the ongoing trade war between the United States and China.”
Earlier, the government said that the same business cycle started in March 2016 at its bottom after the bottom of the previous cycle in March 2013. The peak of the 11th cycle in September 2017 means that the economy improved for 54 months after March 2013 and has shrunk since September 2017. The duration of 54 months is the longest in the business cycle data of Statistics Korea. In that data, the first business cycle of the South Korean economy is from March 1972 to June 1975.
The shrinkage of the South Korean economy in the 11th business cycle has continued for 24 months and this duration is the third-longest in its history. The shrinkage is likely to continue for a while with next year’s economic outlook far from positive due to external uncertainties. For reference, the longest shrinkage in the data continued for 29 months from March 1996 to August 1998 in the sixth business cycle.