[Inside Chodong] Korea's Soccer and Economy: Undervalued Compared to Their Resilience

Slowing Economic Growth Is a Global Phenomenon
Crisis Looms as Semiconductor Performance Declines
Government Support and Strategy Needed Amid Global Uncertainty

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jung] "There is a regret that our economy seems to be undervalued compared to its resilience. It's like soccer."

A senior economic official recently met expressed sympathy for the heightened sense of crisis in the Korean economy, which is highly dependent on external factors, due to the prolonged Russia-Ukraine war causing significant global volatility and the slowdown in growth rates of major countries such as the US and Europe. However, he also revealed some regret. While the slowdown in Korea's economic growth rate next year is inevitable due to the global recession, this is a common phenomenon worldwide and not a problem unique to Korea. Lee Chang-yong, Governor of the Bank of Korea, also said at a press conference after last month's Monetary Policy Committee meeting, "Although the forecast for our economic growth rate next year has dropped to 1.7%, which is concerning, the US growth rate is expected to be 0.3% and Europe -0.2%. It is difficult for us alone to maintain a high growth rate and low inflation when the whole world is struggling."

The 59th 'Trade Day' event held on the 5th was attended by President Yoon Suk-yeol, who encouraged exports, but the atmosphere was heavy as it was held amid a rising sense of crisis across the economic and industrial sectors. According to the Ministry of Trade, Industry and Energy, Korea is expected to record a record annual export amount of around $680 billion (879 trillion won) this year, raising its global export ranking by one notch to 6th place compared to last year. Thanks to the strong export growth in the first half of the year, Korea surpassed $1 trillion in trade volume in about nine months, the shortest period ever, and its global trade volume ranking rose from 9th in 2020 and 8th last year to 6th this year. While this is certainly a cause for celebration, a closer look reveals reasons not to smile.

This year, the trade balance has recorded a deficit for eight consecutive months since April, with a cumulative trade deficit of $42.6 billion as of November, marking an all-time high. In particular, exports in November decreased by 14% compared to the same month last year, marking two consecutive months of negative growth for the first time in over two years since August 2020. The warning light on exports was mainly due to the decline in semiconductor performance, which accounts for 20% of total exports.

Korea's semiconductor industry, the world leader in memory chips, is facing a crisis due to strong counterattacks from Taiwan and China. Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest foundry (semiconductor contract manufacturer) known for its aggressive investments, overtook Samsung Electronics in semiconductor sales in the third quarter this year, thanks to unprecedented government support. The fact that politicians from the US and Europe are rushing to Taiwan to secure semiconductor supply chains underscores the power of the semiconductor industry. Thanks to the growth of the semiconductor industry, Taiwan is expected to surpass Korea in GDP per capita this year.

While countries around the world are striving to secure competitiveness in the semiconductor industry, a key weapon in the global supply chain, Korea's reality is bleak. The amendment to the Restriction of Special Taxation Act, which increases the tax credit rate for semiconductor facility investment companies up to 30%, and the 'K-Chips Act,' officially the 'Special Measures for Strengthening and Protecting National Advanced Strategic Industries Act,' have been stalled in the National Assembly for months.

The driving forces that helped our economy escape the COVID-19 crisis were new growth industries such as semiconductors and secondary batteries. Although K-soccer was completely defeated by the strong favorite Brazil, it showed potential by dramatically overturning the strong team Portugal, ranked 9th in the FIFA rankings. As Baek Seung-ho (Jeonbuk), who scored a goal against Brazil aiming for the quarterfinals, expressed, "We came to the round of 16 with the belief that we could go all the way," the government’s full support and strategy are necessary so that companies can actively compete without shrinking amid the global crisis.