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[EDITORIALS]Reform More Urgent Than Growth

Apr 26,2001
The International Monetary Fund released a gloomy forecast for this year's Korean economy. It lowered by nearly half its projection of Korea's economic growth for this year from 6.5 percent to 3.5 percent. The forecast is based on expected economic sluggishness, including in the United States and Japan, where Korea conducts much of its international trade.

Even though actual results are often far removed from forecasts, we should still pay attention to the IMF's reasoning and the concerns on which it is based. A number of domestic and foreign think tanks as well as the IMF have cut their projected growth rate for Korea to 3- 4 percent. The lowered forecasts say that the Korean economy cannot expect to grow faster, given the international situation, and attempts to stimulate more growth could have serious aftereffects. Market observers are afraid that the government might adopt a strong pump-priming policy because of the presidential election scheduled next year. To alleviate such concerns, the government should downgrade its own 5-6 percent growth forecast.

Instead, the government should focus on faster restructuring. The government is afraid that lowering the economic growth projection might cause consumer confidence to drop and bring on a true recession, but what the public is really concerned about is a credit crunch due to the delay of restructuring, which fuels concern about our economic future. Seoul should have the will to risk a recession in order to complete restructuring. That was the former Reagan administration's policy, and the new Japanese prime minister, Junichiro Koizumi, has indicated he will do so as well.

We should take more interest in curing the chronic disease of the Korean economy, vulnerability to fluctuations of the global economy. The IMF forecast is based on that vulnerability. Deepening of dependency on other economies is inevitable in globalization, but the Korean economy will be able to reduce the impact from foreign economic downturns by making the nation's industries complement one another. The reform of our industrial structure should be carried out to enhance productivity and efficiency, while being attentive to international specialization and division of labor.



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