[EDITORIALS]Is the economic recovery real?Signs of an economic revival are springing up everywhere. Exports are strong, and domestic demand has at last shown movement. Businesses are increasing their investment in facilities, and consumers have started to open their purses. Interest rates and stock prices, which could be called barometers of the economy, are rising at a keen rate.
Reflecting the hopes of an economic revival, interest rates have risen to 4 percent from last year’s 3.28 percent and the Korea Composite Stock Price Index has risen past 1,000. Even pessimistic private research institutes are about to raise their economic forecasts for this year.
A revival of domestic demand is the only hope our economy has left. External factors such as international oil prices and the exchange rate are all moving in an unfavorable direction. This is why the recent signs of an increase in domestic demand are all the more welcome. In order to alleviate the extreme polarization in the economy, the fervor that was concentrated in export industries should be spread to domestic industries as well.
However, we must be prudent before we can confirm that this economic recovery is a long-lasting reality. These signs are now merely psychological indexes. The domestic market has climbed out of the worst slump but it is still unclear whether this will lead to continuous and flexible progress.
Household debts and unemployment rates are still burdensome, and the increase in overseas investment and the low employment effect of manufacturing industries make it hard for household incomes to rise.
We saw last year how a temporary improvement in the indexes does not necessarily lead to an actual economic revival. Social policies that go against market principles emerged after the general election in April while the “oil shock” and the retrenchment of the Chinese economy froze consumption and investment.
The fickle market psychology can go down as easily as it goes up. Until economic actors, such as consumers and businesses, feel the revival and recover their confidence, we must be cautious in handling the economy. Keeping the initial promise of putting the economy first and foremost and maintaining consistency are the most important keys. These factors are the painstaking lessons we learned from the bitter experience of our failure caused by incoherent policies last year.