Economic sentiment and economic polarization

    Despite robust economic recovery, the pace of recovery in small (and medium) en-terprises and lower class households slowed down.

    Although the manufacturing and business survey index for exporters and large enterprises in July registered above the level of 100, the non manufacturing and business survey index for small and medium enterprises recorded below the level of 100, appearing to be a delayed recovery.

    The reason for difference between economic sentiment and the actual econom-ic conditions is due to increased polarization of industry and income. IT manufac-turing contribution to growth rate registered 29.7 percent on a recent recovery trend, higher than Non-IT manufacturing (28.3 percent), remaining at the highest level from the previous recovery trends.

    After financial crisis, Non-IT manufacturing contribution to growth rate re-corded 41.8 percent on the recovery trend, 2.4 times higher than IT manufacturing (17.1 percent). Considering this situation, changes in labor movement show Korea’s economic growth focused on IT manufacturing after financial crisis. Due to the impact of economic polarization, there are possibilities of an increased of business cycle and weakened economic stability. Additionally, there is a possibility of con-tinuous stagnation due to the jobless recovery and weakened Input-Output Analy-sis.

    In order to reduce economic polarization, we need to strengthen fair competi-tion, fully support R&D and global marketing as well as improve the competitive-ness by structure heightening, and encouraging strategic partnership between large and small enterprises and strengthen industrial linkages.