SEOUL -- President Moon Jae-in sought to rejuvenate his presidency with a pledge to revive South Korea's flagging economy, but he faces headwinds from the simmering trade tensions between the U.S. and China.
In his New Year address at the presidential Blue House on Thursday, Moon defended his "people-centered economy policy" aimed at expanding the minimum wage and support for the underprivileged, while calling for greater business innovation.
"Nothing but innovation can make it possible to transform the fast-follower model economy into a pace-setting economy and to create an economy that leads new markets by generating added value," Moon said in his opening remarks. "Innovation will help revive existing industries and foster new industries that will become new growth engines."
Noh Young-min, Moon's new chief of staff, accompanied the leader in the one-hour briefing, along with new political and public relations secretaries. The president has shaken up his presidential team in the hope they can help pull back up his sliding approval ratings, as he comes toward the two-year mark of his five year presidency.
Support for Moon dropped to 46% in December, according to Gallup Korea -- the lowest since his inauguration in March 2017 and down seven percentage points from the previous month. His rating was higher than over 80% in the early months of his tenure on the back of his engagement policy with North Korea but the public have become increasingly unhappy with his economic policies that have failed to create jobs and boost incomes.
In a news conference after the speech, Moon talked more about inter-Korean ties and North Korean leader Kim Jong Un's visit to China this week.
"Kim's visit to China is a signal that shows the second North Korea-U. S. summit is imminent," Moon said. "The first North Korea-U.S. summit was ambiguous. I expect the second meeting should have clearer agreements on detailed actions."
The president continued to be optimistic about the future of the Korean Peninsula.
"The path toward peace on the Korean Peninsula still continues to expand even at this moment, and it will speed up even more this year," he said. "My Administration will cooperate with the international community, including the United States, to resolve the remaining issues such as international sanctions as soon as possible."
Asia's fourth-largest economy is estimated by the Bank of Korea to have expanded 2.7% in 2018, down from 3.1% a year ago. The country may even slow further this year.
"We expect the slowdown in both exports and domestic demand to continue throughout 2019 due to trade tensions, a contraction in investments and a slowdown in the memory chip cycle," said Kim Jin-wook, an economist at Citibank in Seoul.
The trade war between Washington and Beijing is weighing particularly heavily, with South Korea's economy heavily dependent on exports to its two largest trade partners.
Samsung Electronics, the world's largest memory chip company, said Tuesday that its operating profit tumbled 28.7% on the year to 10.8 trillion won ($9.66 billion) for the October-December period. Revenue dropped 10.6% to 59 trillion won during the same period.
"We expect the U.S. dollar value of semiconductor exports to contract by double digits this year, likely moderating its GDP growth contribution," said Kim at Citibank.
Data on Wednesday showed that South Korea's job growth hit a nine-year low in 2018, with unemployment rising to a 17-year high.
This creates a conundrum from Moon and his central bank. The Bank of Korea raised its key rate to 1.75% at its most recent meeting in November to cool down Seoul's housing market and prevent capital flight. But it is unclear whether the lender can continue to tighten policy as inflation remains low, and growth slows.