The chief of South Korea’s statistics office suggested the Korean economy might have peaked before President Moon Jae-in took office in May last year amid growing criticism of the policy damage on the fragile economy.

Economists at home and abroad have warned about the Korean economy entering a trough but the government so far has held up a brave face, claiming the economy is still running at a steady pace, as it stood in defense of its signature trickle-up economic policy aimed at generating growth through increases in income rather than the more typical way of growth helping lift income.

The new statistics chief was recruited in August this year at a time when the agency’s data on income and jobs painted an entirely different picture from what the government had promised, with jobs and income disparities worsening to near crisis levels. His latest comment suggested the economy might have hit a peak and was on a downward trend before the progressive policy took effect.

“I cannot pinpoint the exact month, but the graph in general indicates the economy has peaked around the second quarter of last year,” Kang Shin-wook, commissioner of Statistics Korea, said in a press briefing on Monday.

Kang was quick to add that such assessments take time. “We need to monitor various indicators, gather expert opinions and gain approval from the national statistics commission before we can make a final judgment.”

It is rare for the statistical office to comment on the business cycle that should be studied and defined in hindsight in a much longer term – 10 years on average or longer – by the National Statistics Commission, headed by the deputy prime minister for economy, upon consensus with the central bank and think tanks.

Kang pointed to the six-month-long contraction in the leading indicators to back his assumption.

Both coincident and leading indicators, which measure present and future economic activities to suggest the direction of where the business cycle is at or heading, have been on a downward trend. In September, the coincident index fell to 98.6, marking its sixth straight month of decline. The leading indicator also retreated to 99.2, falling below the 100-threshold for the fourth straight month.

Korea’s growth domestic product (GDP) inched up 0.6 percent in the third quarter against the previous three months and gained 2 percent against the year-ago period, the slowest on-year growth since the third quarter of 2009. This has led the Bank of Korea to cut its economic growth outlook for 2018 to 2.7 percent from the previous 2.9 percent.

The faltering economy has also devastated the country’s job market, sinking to levels not seen since the 2008 global financial crisis. Korea added just 5,000 jobs in July and 3,000 jobs in August, compared to monthly average gains of 300,000 last year.

Critics have questioned Kang’s motive as his comments could lessen the accountability of the government from worsening economic conditions. Moon and his government including the newly nominated deputy prime minister have strongly defended the income-led growth campaign even though the drastic turn in policies, namely the steep minimum wage hike and cutback in work hours, have taken a hit on jobs and domestic demand.

By Kim Tae-joon and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]