[VIEWPOINT]Helpless Han, careless RohHan Duck-soo, deputy prime minister and minister of finance and economy, should feel terrible these days. Although he guaranteed that the economy would definitely recover this year, the atmosphere has not been quite normal recently.
The government forecast that the economy would easily grow 5 percent this year. This forecast seems reasonable, as most forecasting institutes at home and abroad also announced a similar outlook.
They said that it would not be difficult to achieve such growth if exports were sustained and domestic spending recovered a little more. But as the won, which began to appreciate at the end of last year, has strengthened more than expected, our economy is showing red signals. The trend of increasing exports has stopped. The recovery of domestic spending, which occurred at the beginning of this year, fell short of expectations. Business investment is slow and household spending began to contract. This year’s economic forecast, which had been rosy, is suddenly overcast with dark clouds.
But the Blue House and political circles are preoccupied with upcoming local elections in May, settling the wrongdoings committed by past governments and revamping the political community. Next-term presidential candidates are busy too. They seem to believe that they can put all their energy into politics because the economy, which has fared terribly for the past three years, is expected to recover. In this situation, the one in distress should be Deputy Prime Minister Han. It would be difficult for him to take back his assurances of an economic recovery. It would be a poor explanation, whether to the president or the prime minister, to say that the economy this year is likely to be more difficult than he had thought because the won appreciated and international oil prices increased. Even if he gives such a reason, it may sound like an excuse for his mistaken prediction, and he is better not saying anything.
What is more pitiful is that Deputy Prime Minister Han has no particular policy means. Since the president declared from early in his term that he would not adopt a short-term policy to boost the economy, Mr. Han cannot even mention measures that might help the construction industry, which could effectively boost the economy. The construction industry, which has been carpet bombed by all kinds of real estate measures, is unlikely to recover. He cannot lower the interest rate again after having increased it on the premise of this year’s economic recovery. In any case, there is no guarantee that decreasing the interest rate would help the economy recover.
The remaining means to boost exports is by weakening the won, but this is not easy either. The method of defending the exchange rate by selling won has already reached its limit. The Ministry of Finance and Economy has finally said it would prevent the won from appreciating by easing regulations on the foreign exchange market. This means encouraging people to buy real estate in foreign countries and invest in overseas funds. But this method is doubtful in its effectiveness and there are many concerns about its adverse effects. Even so, he cannot suggest expanding financial spending by cutting taxes or issuing debt either.
If the economy does not recover in the future, it is obvious that Deputy Prime Minister Han will alone be held responsible. Mr. Han may think that this is unfair. If he can be blamed for anything, it would be following the Blue House’s way of thinking after watching his predecessor, Deputy Prime Minister Lee Hun-jae, fall from power after clashing with Blue House staffers from the “386” generation. As a result, Mr. Han’s fate has been to just pray for an economic recovery without any policy other than real estate measures. He cannot help but watch the economy be swayed by external conditions. This is the tragedy of the head of economic affairs who has no authority or conviction to operate economic policy. But the president should take final responsibility for economic performance. Tying the hands and feet of the deputy prime minister and restricting his scope of choices is the way the present administration operates. In elections, however, when the public asks who is responsible for economic failures, they don’t ask the deputy prime minister ―they ask the administration.
* The writer is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo
with the Korea JoongAng Daily
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