Preparing for the future

The Korean economy has been nose-diving since the coronavirus outbreak. According to Statistics Korea, our industrial production decreased 3.5 percent in February compared to the previous month, while facilities investment and consumption declined 4.8 percent and 6.0 percent, respectively, as a result of ruptures in global supply networks and increasing social distancing among the public. The business survey index (BSI), a barometer of the future of an economy, fell precipitously in March, signaling a tumultuous future for our economy.

Regrettably, the Moon Jae-in administration has failed to react to the challenge effectively because it is engrossed with winning the April 15 parliamentary elections, as seen in its massive cash handouts to the people in the name of disaster relief. The government decided to dole out 1 million won ($820) to each family of four in the bottom 70 percent of incomes, but it still keeps dilly-dallying over setting the standards for payments. Reacting to the government’s spending, the opposition United Future Party has come up with a 240 trillion won emergency aid package. The Moon administration even talks about drawing up a second — and third — supplementary budget even before the first supplementary budget is spent.

Short-term solutions are important, but a responsible government must prepare for a post-coronavirus era. If it expects the economy to rebound thanks to a recovery in demand once the outbreak is over, that’s a big mistake. Even if the economy bounces back, it will most likely be a weak upturn. Or worse, it could fall into a double-dip recession or turn to an L-shaped decline due to seismic shifts in the world’s industrial structure.

The future of travel, airlines, hotels and restaurants, which have been hit hard by the outbreak, is not bright either. And yet, the government does not discuss this inevitable and alarming change in the global economy.

To make matters worse, our fiscal condition is deteriorating due to unavoidable reductions in corporate and income taxes in the aftermath of the outbreak. There is no other solution than creating a good environment for entrepreneurs to do business and stimulate investment.

The government must immediately scrap its ill-conceived economic policies such as hikes in the minimum wage and the uniform application of a 52-hour workweek. If companies cannot survive, the economy cannot stand on its own feet. We urge Moon to be briefed by the deputy prime minister for economic affairs about his plans for rebuilding a post-coronavirus economy and present a blueprint to the people before it’s too late.