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Top of economic cycle is called: September 2017

Sept 21,2019
The bureaucrats have picked the top of the economic cycle, and the determination helps those seeking to blame the current administration for the country’s troubles.

According to Statistics Korea on Friday, Korea’s economy reached its peak in September 2017 and has experienced deterioration since.

“After touching a trough in March, 2013, [the economy] gradually recovered thanks to strong domestic demand, and the recovery received a boost after the fourth quarter of 2016 due to robust global economic growth and trade,” the statistics agency said.

“[Korea] has been in a contraction phase since September 2017, and the economy continues to experience a slowdown entering 2018, with sluggish global economic growth and the intensified trade dispute between the United States and China.”

The agency added that at the peak point, economic indicators such as the Composite Index of Coincident Indicators and GDP growth reached their highest in the latest cycle, which began in March 2013.

The composite index, which broadly measures production and consumption, registered 101.0 two years ago, while the GDP recorded 3.8 percent yearly growth in the third quarter of the year.

After the top, economic statistics deteriorated for 23 consecutive months through July, the latest month to be tracked, marking the third-longest run of such weakness.

The statistics agency was scheduled to announce the peak month in June but delayed the decision due to disagreement among experts.

The designation was considered important to assess whether the Moon Jae-in administration, which was inaugurated in May 2017, acted prudently.

The major policies enacted by the new government include a rise of minimum wage, an increase of corporate taxes and tough regulations on the real estate market - the policies that many believe are unhelpful in times of economic weakness.

The Bank of Korea also moved to increase its benchmark interest rate in November 2017, and again in the same month of 2018, although a hike is generally considered inappropriate when the economic growth slows.

As for the criticism that the central bank belatedly increased the rate, Bank of Korea Governor Lee Ju-yeol explained in February that it considers different macroeconomic factors in determining the key interest rate.

An economic cycle, also referred to as the business cycle, tracks the upward and downward movements of GDP and the period of expansions and contractions in the level of economic activity.

The Finance Ministry said that the economy has been weakening for six consecutive months in its monthly Green Book, the longest period since the report was first released.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]