[NOTEBOOK]Prospects look bleak at year-end

We are already in the last month of the year. Christmas decorations brighten the streets and Santa Clauses displayed in department stores welcome customers as they have in previous years. But the expressions on the faces of the people scurrying in the streets don’t look so bright. A celebratory year-end mood is hard to find, and the people’s fatigue is evident in their hunched shoulders. Employees gave up on their bonuses long ago and merchants, sitting among their stocked goods, pointlessly blame the chilly weather for poor sales.
The scene at the end of 2003 is a dreary one. Despite the best performance for exports in history, the frozen domestic economy shows no sign of thawing. Despite our hope that business might recover on the occasion of the year-end season, there is no ray of light in the darkened economy.
The government’s assurance that the economy has already hit a trough and begun to recover sounds empty; its assertions sound vacant rather then realistic. Forecasts by domestic and foreign economic institutes regarding the Korean economy also sound like wishful thinking.
The director of a leading Korean economic institute says, “These days, there are no reliable economic forecasts. If you process data based on a sophisticated economic forecast model on a computer, you can get the estimates for major economic indicators. But there are so many non-quantifiable variables that it is hard to place any significance on these results.”
Having many non-quantifiable variables means that there are many economic factors that are hard to measure by assigning them a numerical value. If it is difficult to measure the value of major economic variables, then economic prediction is impossible from the beginning.
Let’s take the investigation into political campaign financing as an example. The prosecution’s probe, which began in order to uncover any illegal funds given to politicians in last year’s presidential election, is now moving toward digging up the slush funds of businesses. As a consequence, the chairmen of many businesses are banned from traveling abroad, and the finance officers of major companies are being summoned by the prosecution. Companies ask how they can develop business plans for next year in this situation. The investigation into the slush funds is clearly a factor that affects the economy. But how can we turn this factor into numbers that a computer can understand?
We don’t know how far the prosecution’s investigation will expand or how deep it will go. The prosecution says it will do its job “according to principles.” But it is hard to predict the result because the “principles” have never been followed.
The repeated disruption in the operations of the National Assembly is also a burden to the economy. Although a number of bills concerning the people’s livelihood and the economy are waiting to be handled by the Assembly, we don’t know when they will be passed or how they will be changed. We also don’t know what will happen before next year’s legislative election. How can we find indications of the ever-changing political situation in the economic forecast model?
These problems remain as economic uncertainties, weighing down the recovery of business at the end of the year. These uncertainties do not simply appear as non-quantifiable variables in the economic forecast model. They also block each economic player from making decisions.
Large companies postpone making investment decisions and merchants at the market delay ordering goods. Foreign investors hesitate to enter the Korean market and housewives cannot replace their old refrigerators. Business executives, concerned about involuntary retirement, do not take the initiative, and unemployed young people are in despair over finding jobs.
If we cannot remove or reduce these uncertainties, it is difficult to assure an economic recovery next year as well. A remark by a government official for economic affairs still rings in my ear: “Won’t business be difficult until the legislative election next year?”

* The writer is business news editor of the JoongAng Ilbo.

by Kim Jong-soo