Global credit rating agency Standard & Poor’s (S&P) joined the chorus of warnings from home and abroad about the negative impact from the Seoul government’s progressive economic policy on domestic-oriented and public companies.
“Exporters will be less touched (by policies lifting wages and shortening work hours to aid income and livelihood), but sectors devoted to the domestic market could be affected directly or indirectly,” Junhong Park, an S&P analyst, told a media event in Seoul on Thursday.
Under the income-led growth policy of the Moon Jae-in administration to achieve more equality in the economy, minimum wage went up by nearly 29 percent over the last two years to 8,350 won ($7.35). Statutory maximum workweek was cut to 52 hours from 68 hours.
Steep hikes in minimum wage had wiped out jobs and sent mom-and-pop stores out of business, while corporate activities were hampered by the sharp cut in work hours.
The administration’s other progressive policies – phase-out from nuclear reactors and meddling in prices – have hit hard on the public as well as private enterprises, he said.
State utility firm Korea Electric Power Corp. has suffered sharp deterioration in profitability to oblige with the government’s energy policy of promoting costlier renewable energy and imported fuel over cheaper nuclear fuel made at home, he said.
It is questionable how much retail price can reflect the jump in production cost. The company is managing for now on past earnings, but it won’t be able to sustain long, he added.
Forced fee cut has hurt the bottom line and debt rating of SK Telecom Co., the country’s leading wireless service provider, he said.
He was negative on general Korean Inc. “I cannot find any industry that is expected to do better including the mainstay sectors of electronics, IT, petrochemicals, and steel,” he said.
Korean companies would have to seek more debt to keep up investment for growth, he predicted.
S&P has kept Korea’s sovereign credit rating at AA with a stable outlook, the third highest on its scale since August 2016.
By Chung Seok-hwan and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]