SEOUL -- The South Korean government on Monday downgraded its economic growth estimate for this year as capital spending and exports lose momentum amid the U.S.-China trade war, adding to the woes of a president already struggling with falling public support.
Gross domestic product is now seen expanding between 2.6% and 2.7% in 2018 -- less than the previously forecast 2.9% -- and by around the same rate in 2019. Corporate investment dropped sharply in the second half, with the July-September number down 7.4% on the year, while exports grew just 1.7%.
The downgrade comes at a time when President Moon Jae-in is contending with record-low approval ratings. In addition to the slowing economy, the lack of progress in economic cooperation with the North also dampened public enthusiasm for the government. Moon hopes to shore up support by rolling out additional stimulus measures.
The South added 100,000 jobs over the past year, but mostly through expanded hiring of civil servants and seniors. The manufacturing sector lost 91,000 jobs on the year in November, recent statistics show. One yardstick of economic prospects, a composite of leading indicators, fell by 0.4 point in October to mark a fifth straight month-to-month decline. The lack of improvement in employment is also dampening consumer sentiment.
"Many citizens have not been able to feel the fruits of economic policy," Moon told cabinet members in charge of economic policy on Monday. "The government will deliver results next year," Moon said, hinting at slowing the pace of minimum wage hikes, which have been unpopular among business owners.
Support for the administration hit an all-time low of 45% in a Gallup Korea poll released Friday, down 9 percentage points from a month earlier. The disapproval rating climbed 8 points to 44%.
Asked to state the reasons for not supporting Moon, a leading 43% cited the economy and related struggles. Among these respondents, the most striking drops in support came from three groups hit hard by economic stagnation: those in the manufacturing-heavy southeastern region of Yeongnam, business owners widely dissatisfied with labor policies, and 20-somethings. Disapproval exceeds approval for Yeongnam residents and business owners.
An automotive-sector slump has hit Yeongnam particularly hard. Hyundai Motor, which has facilities in the region's city of Ulsan, saw operating profit explore record-low levels last quarter amid shrinking sales and steep costs. Those who run their own businesses, meanwhile, have been squeezed by two consecutive years of double-digit raises in the minimum wage, along with the lowering of the cap on weekly working hours to 52.
Among those in their 20s, support for the administration has fallen by nearly half in the past half year. The difficulty of finding work and a widening wealth gap have spurred strong dissatisfaction.
"The Moon administration doesn't care about anything besides North Korea," a 20-something college student said.
"My expectations have faded," a company employee in her 30s said.
Moon fired two key economic policy officials in November to spur income-led growth, where job creation and wage hikes were meant to encourage spending and improve the economy. But his approach has still failed to gain traction. Meanwhile, Kim Jong Un is unlikely to visit Seoul by year-end as Moon had hoped, leaving few prospects for progress in North-South cooperation.
The South's economy is closely linked to that of China, which is experiencing its own slowdown, so Seoul's domestic economic policy may well not be enough to stage a recovery.