[EDITORIALS]Uncertainty tightens pursesThe Korean economy shows a strange development. There’s apparent signs of recovery: For example, exports and the manufacturing industry’s capacity utilization rate have hit their highest levels in several years. Production activities, shipment and construction also show sturdy growth. The economy is in recovery according to the usual indices.
On the other hand, indices about business and consumer sentiment are hovering around the bottom. Wholesale and retail sales in October dipped another 1.7 percent, the eighth consecutive month of decline. Capital spending has been going down as well, losing another 3.8 percent in October.
It is normally expected that if exports go up and factories are operating near full capacity, profits will follow, boosting incomes and employment and contributing to the recovery of consumption and investment. But why is this not happening?
The answer lies in the sense of uncertainty shared by businesses and consumers. There are many reasons behind the uncertainty, such as a militant labor movement, political conflicts, the prosecution’s investigations of large corporations, and looming insolvency in the credit card industry. But what contributes most to deflating business sentiment of economic players is that they are now compelled to worry what other bad news will await them around the corner and what move the government will make. That forces companies to restrict spending and consumers to tighten their purse strings.
If the current situation continues as it is, Korea’s economic future looks bleak. Without capital spending and domestic demand, an economy propelled only by exports will soon reach its limits. As companies contemplate how to move their production to other countries, the economy’s engine will soon halt, and Korea will be left behind.
To make companies and consumers open their wallets, what is required is to eliminate uncertainty. It is the responsibility of the government and the political establishment to create an environment where companies and consumers can operate their businesses without being anxious over uncertainty.