SEOUL/HONG, KONG – South Korea’s export-dependent economy is facing a “grave situation” as the U.S.-China trade war and the spread of trade protectionism heap pressure on the global economy, President Moon Jae-in said in a parliament speech Tuesday.
Moon’s speech comes after the latest South Korean export data point to another dismal month for global trade. An escalation of tariffs from the trade war and ensuing uncertainty have hurt exports, investment and consumption in South Korea, shaving 0.4 percentage point off its economic growth this year, according to central bank estimates.
Moon’s approval rating has been sliding in recent weeks, chiefly due to a scandal related to a close political ally but also due to the country’s weak economic performance. The pace of economic growth has been trending downward since Moon took office in 2017, and is expected to slow to around 2 percent this year, the weakest since the global financial crisis.
Moon also said Seoul would increase military spending and urged the North to return to dialogue in his speech Tuesday that could infuriate Pyongyang with nuclear talks gridlocked.
Contact between North and South Korea stalled after the collapse of a February summit between North Korean leader Kim Jong Un and U.S. President Donald Trump in Hanoi.
Since then Pyongyang has excoriated its neighbor over joint military drills with the U.S. and the acquisition of American fighter jets.
It is a far cry from the cross-border warmth of last year, when Moon seized on the Pyeongchang Winter Olympics to broker the North-South discussion process and held three summits himself with Kim.
South Korea will increase defense spending by 7 percent to more than 50 trillion won ($42 billion) next year, Moon told parliament, emphasizing that “strong defense” was crucial for “self-determination.”
“We will strengthen the core defense system by boosting assets such as next-generation submarines and surveillance satellites.”
The announcement came after North Korea this month tested what it said was a submarine-launched ballistic missile that marked a “new phase” in its capabilities — the most provocative in a series of weapons tests it resumed after an 18-month hiatus.
North Korea is under multiple sets of U.N. sanctions over its nuclear and missile programs.
Pyongyang and Washington restarted working-level talks in Sweden this month only for them to quickly break down, with the North blaming the U.S. for not giving up its “old attitude” and setting the end of this year as deadline for Washington to change its stance.
It has also said it has nothing more to talk about with Seoul, and condemned joint South Korea-U.S. drills and the deployment of F-35A fighter jets in the South as rehearsals for invasion and violations of Seoul-Pyongyang agreements.
But Moon — who has long championed engagement with Pyongyang — held out hope for a breakthrough despite the setbacks, claiming that the deadlocked talks were the “last hurdle” before denuclearization.
A “bright future” for the North would only be possible on the basis of a “peace economy” driven by inter-Korean economic projects, he said. “I urge the North to respond.”
In Tuesday’s speech, Moon urged parliament to approve the 2020 budget proposal, which would raise spending by 9.3 percent from this year’s plan. South Korea’s annual budgets typically have faced political wrangling in parliament, and tend to be approved close to the deadline after some amendments.