Domestic Policies Hamper Korea's Growth: Moody's

Minimum wage hike blamed for sagging job market

By Kim Bo-eun

Domestic economic policies such as the minimum wage hike are impeding Korea's growth, Moody's Investors Service said Friday, citing it as one of the key factors for its recent cut in the country's 2019 growth outlook.

'Our low forecast reflects some of the negative impacts from the softer sentiment stemming from domestic policy, largely showing the softness in job market growth, which appears to have exacerbated the external pressures,' Moody's Investors Service Vice President Christian de Guzman told The Korea Times in an email interview.

His comments came a few days after the global credit ratings agency released its outlook report in which it downgraded Korea's real GDP growth for 2019 to 21 percent from its earlier prediction of 23 percent in November It also cut its 2020 growth outlook to 22 percent from 25 percent.

Moody's outlook is well below the Bank of Korea's forecast of 26 percent, which is the same as the OECD's prediction.

In the report, Moody's pointed out that the minimum wage increase is largely blamed for the lackluster employment growth, with small businesses viewing the hikes as a challenge to their competitiveness.

The minimum wage for 2018 and 2019 rose by 16 percent and 10.

9 percent, respectively, on a year-on-year basis. The minimum wage hike was a key component of President Moon Jae-in's iconic income-led growth policy.

Guzman said external factors such as China slashing its GDP growth target for this year to between 6 percent and 65 percent will exert a negative impact on Korea's growth rate.

The US-headquartered agency expects the Chinese economy to...