[EDITORIALS]Darkening economic newsThe Bank of Korea now estimates that gross domestic product will grow by 1.9 percent in the second quarter, and it has lowered its prediction of this year’s economic growth from 4 percent to 3.1 percent. That is much lower than Korea’s growth potential and means that our economy is in more serious shape than we feared. The bank’s decision to lower the prime interest rate also reflects uneasiness over our economy. We wonder, however, whether the government and its economic team really understand the root causes of the economic crisis.
On the effect of lowering interest rates, economic experts as well as businessmen are not convinced. They are skeptical that the hundreds of trillions of won floating in the market will now pour into the stock market or industry just because the interest rate is down. They worry that instead real estate speculation will get a boost, as it did in May.
Although unease over such external uncertainties as the North Korean nuclear threat, the Iraq War and SARS have diminished, the Korean economy has not regained its vitality because businessmen are uneasy over the government’s inclination toward populism, unfriendly attitude toward business and confused policy guidelines. They consider the administration’s pro-labor labor policy and the militant union movement as the most serious obstacles to the Korean economy. Therefore, the effect of the rate cut will be limited. We need a fundamental solution, not a short-term remedy.
In order to induce foreigners to invest here, we must stick to a principled labor policy and maintain continuity in economic policies. Labor unions and interest groups must refrain from making absurd demands and staging violent struggles. The Korean economy is at a crossroads; it may collapse or leap forward to an advanced economy with a $20,000 per capita income. The crisis feeling in the market is higher than the economic figures suggest. The Korea Development Institute, warning against pump-priming, suggests building confidence in a new economic order. Politicians, labor and the whole nation should join hands with the government.