Sluggish growth expected for economy-supporting manufacturing
Kwon Dae Gyung | kwon213@ | 2018-05-14 10:58:35

Manufacturing industry, which was a strong supporter of the Korean economy, is now facing crisis. The production indexes are turning to minus, focusing on export-oriented industries such as automobiles, shipbuilding and steel, and industrial jobs are decreasing sharply.

Especially, the manufacturing industry has slowed sharply, and the production of intermediate goods, which has been supported by the finished goods industry, centered on large corporations, is also decreasing. Some intermediate goods such as automobiles and textiles are being threatened by domestic imported products such as China and Europe. Fourth, the growth of the industrial revolution has been down and the manufacturing industry, which is the main industry, has sharply shrunk, raising concerns that the growth of the Korean economy is closing. Analysis of the manufacturing-related indicators of the Ministry of Strategy and Finance, the National Statistical Office and the Bank of Korea showed that the slowdown in the automobile, steel and shipbuilding sectors including intermediate goods production was more serious than expected. Overall manufacturing output grew 10.6 percent last September. However, overall the worst was in March (-4.7 percent) from October (-6.2 percent).

Automobiles, shipbuilding, and steel, which are regarded as so called "Troika" in the Korean export and manufacturing industry, have led to a downgrades in the index. Automobile production fell to -12.5%, and the shipbuilding industry in March, which suffered a sharp restructuring, fell to -24.6%. The domestic intermediary sector, which is classified as backward-supporting industry with the recession of Korea`s leading manufacturing industry, is also falling back. The intermediate goods industry refers to raw materials and parts that are essential for the production of finished goods. So far, it has played a central role in raising the competitiveness of Korea`s manufacturing industry. However, along with the recession in the domestic manufacturing industry, the productivity of intermediate goods also recorded negative growth in the first quarter (-3.1%), following the fourth quarter (-5.7%) last year. In particular, the domestic production of domestic intermediate goods also fell to -6.9% and -4.5% in the same period, respectively. Some industries, such as cigarettes (29.4%), leather and footwear (59.6%), wood products (29.4%) and electricity maintenance (25.0%), . The share of foreign automobiles (14.3%) has also been steadily rising. The recession in the manufacturing sector is directly linked to a decrease in manufacturing jobs. According to the National Statistical Office, 2,384 workers in the manufacturing industry in the first quarter of the year were out of the field. It is minus 3 consecutive quarters since the number of 2,394 people decreased in the third quarter of last year. In March, the manufacturing industry average utilization rate stood at 70.3%, and the manufacturing industry survey index (BSI) fell to 77 in April, indicating that manufacturing indicators are at its worst after the global financial crisis.

Economists are concerned that the recession in manufacturing, which was the core competitiveness of the Korean economy, may not only lead to the same industry but also act as an obstacle to the growth of future industries such as the Fourth Industrial Revolution. Chief economist of the Hyundai Economic Research Institute said "It is impossible to create a new growth engine without solving the crisis of the mainstream industry.” "More intensive policy efforts are needed for the traditional manufacturing industries, "We need to have a full-time restructuring system in place to expand our operations." The 4th Industrial Revolution Industry is also based on the main industries such as basic materials, machinery, information technology (IT), and automobile. Therefore, it is claimed that the competitiveness of existing manufacturing should be maximized.

By Sejong= Kwon Dae Gyung & Cho Eun Ae kwon213@

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