Start the growth engine of S. Korean economy

Nov 11, 2019, 09:21 am

By AsiaToday reporter Yoo Jae-hee

“It is appropriate to expect South Korea’s economic growth this year to be 0.1 to 0.2 percentage points lower than projections by key international organizations at around 2.0 percent. The country’s growth rate is highly likely to fall below 2 percent. It’s time for the government to find a solution to reverse the economy.”

There is growing concern among experts who forecast the country’s economy to fall 1 percentage point more than the government’s growth forecast at 2.7 percent. If the country’s economic growth slows down further this year, it will possibly fall below the 2 percent mark for the first time in 10 years since global financial crisis in 2009.

The government plans to minimize the impact of external shocks through expansionary financial management while focusing on revitalizing the economy. However, experts say that measures for deregulation and flexible labor market are essential.

“I’m aware that the current economic situation is as severe as it was during the global financial crisis in 2008,” Finance Minister Hong Nam-ki said at a parliamentary audit last month.

The reason why the economic control tower is expressing concerns is that there is no sign of recovery. According to the Bank of Korea (BOK) on Sunday, the cumulative growth rate of the third quarter remained at 1 percent. In order to maintain 2-percent annual growth this year, growth should exceed 1 percent in the fourth quarter. However, it is unlikely to happen.

Amid a steady decline in exports and investment, consumption shrank sharply as well. The country’s exports dropped for 11 consecutive months. By September, facility investment declined 10.8 percent from the same period last year. Construction investment also decreased by 5 percent. The country’s consumption contracted 2.2 percent in September, marking the fastest fall since December 2017.

Although there was relatively positive sentiment towards labor market, doubts have been expressed about the quality of employment. As of August, temporary workers numbered 7.48 million, up 867,000 from a year earlier.

The business community points out that the government has not been interested in economic diagnosis and countermeasures while slowing down its growth rate. It is because the government has relied on expanding its finances by increasing deficit while economic downstream factors have been intricately connected.

Experts claim that it is necessary to take a closer look at the country’s finances to reduce the issuance of government bonds. Many point out that the government focused on pasting over the cracks by adjusting economic indicators and foreign currency statistics instead of coming up with permanent solution to overcome the crisis.

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