SEOUL (Reuters) - South Korea’s exports will grow at a solid pace for a while yet, but there are risks if a trade spat between China and the United States intensifies, a top aide to South Korea’s president said on Thursday.
“I don’t see export growth shrinking in the short-term, although we should be cautious about possible downside risks,” Yoon Jong-won, the senior secretary to the president for economic affairs, told Reuters in an interview.
Yoon said Asia’s fourth largest economy will benefit from solid global growth that is supporting an uptick in exports of memory chips and robots, as well as petrochemical and renewable energy products.
South Korean exports grew 15.8 percent in 2017, but policy makers expect the pace to slow down to 5.3 percent this year and 2.5 percent in 2019.
A Reuters poll of economists said on Wednesday exports were expected to have grown faster year-on-year in August versus July, even as U.S.-China tensions loomed over global trade.
Asked about the challenge facing President Moon Jae-in’s government to create jobs and boost household income, Yoon said real household income has started to rise due to government policies.
Real household income increased for a third straight quarter through the April-June period this year, which Yoon credited to a series of policies, including a sharp increase in the minimum wage.
President Moon’s government is banking on record fiscal expenditures and an ‘income-led growth’ strategy to boost jobs.
But unemployment among 30 and 40 year olds — his main political support base — pushed Moon’s approval ratings to a record low of 56 percent on August 24, having plunged by nearly 30 percentage points since peaking in June.
This week consumer sentiment also plunged to its lowest level since March 2017 and highlighted the fragile state of domestic demand, data from the Bank of Korea showed.
Yoon said private consumption growth was “solid” and helping to offset sluggish investment activity.
In July, the government cut its growth forecast for this year to 2.9 percent from 3 percent, citing a feeble labour market recovery and global trade tensions.
The economy grew 0.7 percent in the second quarter, slowing from 1 percent growth a quarter earlier on weaker exports and capital investment.
Yoon served as the nation’s ambassador to the Organisation for Economic Co-operation and Development (OECD) before he took on his current role at the presidential Blue House.
(This version of the story replaces policy description in the 7th paragraph.)
Reporting by Cynthia Kim and Choonsik Yoo; Editing by Darren Schuettler