S. Korea’s surprisingly bad economy deepens troubles

SEOUL • South Korea’s Moon Jae-in has staked his presidency on tackling two big challenges — North Korea and the economy. Both are proving stubborn foes.

The country’s GDP contracted 0.3% in the first quarter — the biggest decline in a decade — the Bank of Korea said yesterday.

The blow came just two days before the president was expected to mark the first anniversary of his historic summit with North Korean leader Kim Jong-un — with an event snubbed by the North Koreans.

“Not only the data yesterday, but also latest data showed that the economy is performing worse than expected. It won’t get any easier,” said Park Sangin, a professor at Seoul National University’s Graduate School of Public Administration.

“It is a very burdensome situation for the Moon administration.”

Moon’s policy double-whammy comes as he prepares to enter the third year of his single five-year term.

The setbacks threaten to accelerate his shift to lame-duck status ahead of legislative elections next year — a fate that has befallen every democratically elected leader of Asia’s fourth-largest economy and made it more difficult to advance their agendas.

The economic structural problems, including a slowdown in nearby China and weakening global demand for semiconductors, were going to present any South Korean leader with problems.

So, besides pledging to make himself the “jobs president”, he threw himself into convincing Kim and US President Donald Trump to stop threatening each other with war and come to the negotiating table.

The peace push helped for a time offset series of economic setbacks, pushing Moon’s approval rating to 83% in the wake of his historic April 27, 2018, meeting with Kim on their militarised border.

But his support has slipped as talks between the US and North Korea faltered, to 48% last week, according to Gallup Korea.

Trump’s decision to walk away from his Feb 28 meeting with Kim without a deal left Moon exposed to new criticism.

The conservative Opposition Liberty Korea Party has grown more emboldened as its own support rate inches up, opposing Moon’s appointments in Parliament and mounting a protest against his North Korea policies last week that organisers said drew 20,000 people.

Meanwhile, Kim has turned up his criticism of Moon, calling on him to stop acting like an “officious mediator” as North Korean state-media escalates complaints over U.S.-South Korean military exchanges.

The North Koreans won’t be attending a series of artistic performances being held on Saturday to celebrate the first anniversary of Moon and Kim’s agreement to achieve a “comprehensive and epochal improvement” in ties between the former foes.

There have been some bright spots for Moon, including his government’s much-lauded handling of a wild fire earlier this month that killed only one person despite consuming 1,760ha of occupied land. Such successes have helped make Moon’s support more resilient than his predecessors.

But South Korea’s economy will continue to vex the president. The contraction comes even as Moon’s administration ramps up fiscal support, with an extra budget announced this week that came on top of a record

budget already in place for 2019. Exports, which account for about half of South Korea’s GDP, are on course for a fifth-straight monthly decline amid weak demand from

China, the nation’s biggest market. And public displeasure has mounted over Moon’s support for sharp minimum-wage hikes, which have been blamed for helping hold the jobless rate at its highest level in about nine years.

Some supporters of Moon’s North Korean policies are urging the president to prioritise economic reforms.

“It’s good to continue to play a facilitator’s role, but now he really has to accomplish something,” said Park Won-suk, a former lawmaker at the progressive Justice Party.

“For the citizens, accomplishment is about the economy, the issues related to their livelihood. The presidential office and the president should focus on those issues.” — Bloomberg