[EDITORIALS]Time to hit the brakesThe gross domestic product grew in the first quarter by 5.7 percent compared with the same period last year, preliminary data issued Wednesday showed. The growth far surpassed the 4-percent projections by the government and the central bank, and adds to indications that the economy may be overheating.
We have on several occasions pointed out that macroeconomic policy measures must be taken to control the speed of the recovery. Indications are plentiful that the recovery is too fast-paced, especially in real estate and domestic consumption.
Economic speeding poses a threat to economic health by creating bubbles and inflationary pressure. Seoul did shift the fiscal policy gear to neutral from expansionary earlier in the year, and has also taken action in the real estate market to slow private consumption among other reasons. The Bank of Korea also moved early this month to increase the call rate by a quarter of a percentage point.
Wednesday's GDP numbers highlight the need to intensify policy measures. The economy is recovering rapidly but domestic consumption still outweighs other sources of growth. Signs now also point to a turnaround in exports and business investment.
Second-quarter growth, especially with the spur of the World Cup, will probably surpass that of the first quarter. Private think tanks have projected up to 7 percent growth in the current quarter under present conditions. That is clearly more than the economy's estimated full-employment rate of growth of 5-6 percent, when resources are fully used but inflation is in check.
Having seen the first-quarter results, the government and the central bank need to step in. Oil prices, exchange rates and lackluster business investment are all still clouds on the horizon. But now that alarm bells have gone off, the authorities should not delay their response. It would not be an easy decision to tighten the purse strings just as elections approach, but neither can the economy be made a hostage to the elections.
A failure in macroeconomic management now would overshadow this administration's accomplishments in overcoming the financial crisis of four years ago.