[EDITORIALS]Ending economic uncertaintyIt’s all very depressing news. We just can’t seem to revive domestic demand. The number of bankrupt firms has risen while the number of newly established firms has shrunk. CapitaI investment has declined. Jobs are not being created and overall economic activity is dwindling. Our favorable export situation is the one thing that is supporting our economy, but a recent report by the Korea Institute of Finance warns that the tendency of rising exports not to lead to increased domestic production and employment is becoming structurally permanent. This portends further gloom for the economy.
Even the government is withdrawing its optimistic view that the economy would recover in the second quarter. The Bank of Korea and economic institutes are lowering their forecasts for economic growth in the second half a few notches. The annual growth rate that was initially expected to slightly exceed 5 percent is now seen below 5 percent.
Lagging investment is the biggest reason we find ourselves in such a quandary. Firms are not investing, and this means new jobs are not being created and domestic demand is dragging. The solution to our problem, therefore, lies in finding out why firms are not investing. The biggest reason may be that firms have not found the right investment items, but business owners also point to the “uncertain economic environment.”
President Roh Moo-hyun and the government have asked business owners to point out specifically what is so uncertain about the economic environment. However, just one look around would show anyone how disorderly things are. The issue of transferring the capital alone has caused a serious division in national opinion. The 17th National Assembly hasn’t been able to form in-house committees, let alone discuss urgently needed welfare issues. The international economic environment is turning worse for us, making even exports unreliable.
Despite the unfavorable conditions, some of the owners of major companies have recently informed the president that they will increase their investment. If these companies are to actually start investing, the government and the political community should make more of an effort to eliminate elements of uncertainty. If we continue this way, we will only fail.