[EDITORIALS]Dubious improvement

The Korea Composite Stock Price Index has broken the 1,100 mark. The government has announced that gross domestic product grew at a higher-than-expected 3.3 percent in the second quarter. The finance minister has urged domestic businesses and citizens in general to dispel pessimistic thoughts about the economy, saying it could grow at a rate of 4 percent during the second half and 5 percent next year.
But for ordinary households, the situation does not seem to be getting better. Though GDP grew at a 3-percent rate, gross domestic income did not grow. As we have imported expensive raw materials and sold exports cheaply, national income has stood still. It is no surprise that ordinary people sense no economic improvement. Factoring out consumption overseas, which grew by 30 percent during the second quarter, brings the quarter’s 2.7-percent growth in consumer spending down to a mere 1.5 percent. In other words, people are not opening their wallets here, though they spend lavishly overseas. This will not improve matters.
The biggest challenge is sagging corporate investment, which prompted even the finance minister to say, “Korean companies have more than 70 trillion won ($70 billion) in cash, yet they rarely invest.” Corporate spending on infrastructure and facilities grew at a rate of just 2.8 percent during the second quarter.
Now we need to look at whether the stock market surge is based on fundamental economic health, or is just a mini-bubble caused by high liquidity and low interest rates. A market surge not backed by corporate investment is bound to reach its limit soon. Export growth has been in the single digits this year, and there will be no way out unless consumer spending and corporate investment improve. It is imperative that consumers and businesses regain confidence. Three-percent growth, which is far below our potential, will not convince them that things are getting better.