ASSESSMENTS

South Korea's Economic Doldrums Have Taken the Wind Out of Moon's Sails

Oct 4, 2019 | 09:00 GMT

A South Korea freighter anchors at Qingdao, China.

Exports, the backbone of the South Korean economy, have taken a hit over the past year, dragged down by the weight of global uncertainty, a trade battle with Japan and a glut of semiconductors that have flattened that market.

(Visual China Group via Getty Images)

Highlights

South Korea's economic woes have troubled the political prospects of President Moon Jae In's government going into 2020 legislative elections, raising the prospect that he will become a lame duck.
While Moon will not abandon his progressive policies, a need to sustain economic growth and support indigenous supply chains means he will ease back on his confrontation with South Korea's massive chaebols.
Moon will dig in as the trade skirmish with Japan continues, banking on the popularity of this approach and the issue's convenience as a scapegoat for larger issues.

South Korea's difficult economic environment won't just make it harder for President Moon Jae In to enact his political agenda; in the next few months, it will threaten the continuity of his government. As with the rest of the Asia-Pacific, South Korea's economy is contending with slackening global demand, the volatile U.S.-China trade war and a cooling Chinese economy. The legislative elections that risk turning Moon into a lame duck take place in April 2020, and until then, he will have to balance carefully between delivering on promises to his supporters and buoying economic growth. This means he will have to rely more on the family-run conglomerates known as chaebols that dominate the South Korean economy to both support growth and build resistance to global trade disruptions. He will also take a more defiant stance against Japan amid their trade skirmish -- a popular stance among his base within the South...

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