[EDITORIALS]Economy Demands Proper CareDespite concerns about a recession － the economy has shrunk rapidly since the second half of last year － the nation's gross domestic product grew 3.7 percent from a year earlier, beating expectations of 3.5 percent growth. Although it is unclear from only the first-quarter performance whether the economy has hit bottom, it seems at least that it will not decline further.
Still, we are concerned about three things. First, economic polarization intensified in the first quarter. Exports' contribution to GDP growth topped 130 percent and that of the information-technology industry jumped to 71 percent. The polarization between exports and imports and that between IT and non-IT intensified far more than it did last year.
As the problem, along with a growing regional and income gap, increases economic instability, narrowing the divide has come up on the government's urgent policy agenda.
Second, the government should also pay special attention to a 7.9 percent drop year-on-year in facility investments by companies. While the fall may suggest a reaction to increased facility investments last year, it is certainly not a problem to be left neglected, given economists' analysis that the ratio of facility investments to total sales by the nation's 30 largest conglomerates plunged to half of the pre-crisis level. Because such investments are driven by large companies, a majority of which belongs to chaebol groups, policies to encourage chaebol are particularly called for.
Lastly, the government should focus on restructuring and keeping the budget balanced, rather than on boosting the economy. In particular, it should be very careful about doling out pork-barrel economy-boosting measures that seem to be announced every day, such as transfer-tax exemptions on newly-built houses and major construction projects.
It is not only that such policies would disrupt the current taxation system but also that stimulating the construction industry, which is still slow in restructuring, conflicts with reform efforts. In the same context, we believe that there is no rush to set aside an additional 5 trillion won for a supplementary budget. Although we think that a pump-priming budget is not necessary under the current situation, it is not too late to earmark the funds, if the government chooses to, after the second-quarter results come out.
Only by doing so can the government avoid being criticized for using pork to sway next year's elections.