SEOUL (THE KOREA HERALD/ASIA NEWS NETWORK) - South Korea finds itself in an odd place as 2019 begins.

Progress in inter-Korean detente slowed at the end of 2018 after three historic summit meetings between South Korea President Moon Jae-in and North Korean leader Kim Jong-un.

The economy also slowed at the end of 2018 as business and consumer confidence weakened. The slowing of good news has caused Mr Moon's popularity to decline, raising fears that the nation will be left with weak leadership amid growing challenges.

To deal with these challenges, South Korea needs a game plan for 2019 and beyond. The game plan should focus on two words that Mr Moon has repeated in speeches last year: Peace and prosperity.

Building peace refers, obviously, to North Korea, but it also includes relations with neighbours.

An obvious way toward peace between the two Korean states is reunification into one state.

Since the division in 1948, each Korean state has claimed to be the only legitimate Korean state.

Reunification in this context meant that one state would conquer or absorb the other. The first attempt at this was the North Korean invasion of South Korea in 1950.

The three inter-Korean summits have created a new situation in which both Korean states can now imagine peaceful co-existence without reunification.

Neither state has yet to abandon its claims to the entire peninsula, but the momentum is moving in that direction.

Mutual recognition and abandonment of territorial claims have been critical to achieving a lasting peace as they have been in other conflicts around the globe.

The challenge for the Koreas is building sufficient trust where they take the dramatic step toward mutual recognition.

South Korea remains deeply suspicious of North Korea because of the Korean War and waves of aggressive actions since the end of the war in 1953.

Many in South Korea view North Korea's nuclear weapons and ballistic missile programmes as proof that its aggressive stance has not changed.

North Korea, by contrast, looks south and sees a prosperous economy that threatens to stir aspirations for change that could challenge the regime. It also sees its nuclear weapons and ballistic missile programmes as the only way to counter the overwhelming power of US military forces.

Building trust in this context requires a steady flow of small steps that focus on peace through mutual recognition. The significance of each step is less important than maintaining a steady flow that builds trust.

Inter-Korean summits this year, like those last year, are critical to maintaining momentum.

Prosperity comes from sound economic policy. The South Korean economy has not fallen into recession, but growth has slowed and concerns over employment security and the cost of housing abound. Some of the problems are real while others are about perception.

According to recent polls, the biggest drop in Mr Moon's popularity comes from men in their 20s. They had hoped that the new administration would bring change but have turned on the president because they feel no change.

Small business owners, a traditionally more conservative group, have become more critical of the President as business conditions have become more difficult.

South Korea is now experiencing the same problems that have caused economic dislocation in a number of advanced countries: deindustrialisation, ageing population, and changing consumption patterns.

The decline in manufacturing and traditional mom-and-pop retail and a growing tech and service economy combined with an ageing population has created a mismatch in the labour market.

Much of South Korea's economic and social progress has come from an intensive focus on achieving big, long-term goals.

Mr Moon should draw on this spirit and focus economic policy on supporting the transition from an economy centred on the export of manufactured goods to an economy centred on technology development and skilled services.

To do so, the government needs to increase support for advanced education and reduce regulation on economic activity.

Over the short term, the government needs to address the high cost of housing that burdens the middle class. The best way to reduce the cost of housing is to promote construction so that increased supply will reduce pressure on prices.

Japanese cities have escaped the rapid increase in home prices that affect cities in other advanced countries because supply keeps up with demand.

Peace and prosperity are beautiful words, but they mean little if facts in the street do not back them up.

Bridging the gap between words and reality through sound, forward-looking public policy will test Mr Moon Jae-in's leadership skills as never before.

Mr Robert J. Fouser is a former associate professor of Korean language education at Seoul National University. The Korea Herald is a member of The Straits Times media partner Asia News Network, an alliance of 23 news media organisations.