The long haulPresident Lee Myung-bak said we’ve entered a tunnel whose end is not in sight. Thanks to a currency swap contract with the United States, we have barely escaped a foreign exchange crisis. But more challenges await.
There are many signs that the real economy is tumbling. In September, industrial production fell into the red for the first time in seven years. The coincidence index and the leading index have slid down together for eight straight months, the first time in 27 years. The president’s warning feels even more serious when we look to next year. Moody’s predicted our economic growth rate for next year to be 2.2 percent. UBS then cut it down to 1.1 percent. A long and harsh slowdown is materializing more clearly as time goes by.
We need to prepare for a long battle. As the financial woes spill into the real economy, corporate bankruptcies will certainly increase. If companies tighten their belts even more, an unemployment crisis will be unavoidable. Household incomes will shrink and life will become harsher.
The government must then work hard on the front line to find a way out. It is its duty and raison d’etre. Contingency measures aimed at restoring growth and creating jobs are desperately needed more than ever. Financial investment must be increased boldly and substantially, and the interest rate must be lowered more quickly. The primary goal in policy should be to make an economic slowdown as short and weak as possible.
There is no room to be absentmindedly shocked at the exchange rate or stock prices, or to welcome a current account surplus, because our economy is facing serious challenges. When the country is shaking, the government should find a center of gravity.
The economic team must not make the same mistake again, getting lost and not knowing where to go. They should end individual fights and send a unified message. They should abandon useless options, such as the president’s earlier pledge to achieve 7 percent economic growth, $40,000 in per capita income and to become one of the world’s seven strongest countries.
They should instead focus on deregulation and reforms in public corporations. All economic participants must get together with the government at the center in order to overcome the crisis.
At the end of this long, dark tunnel must be a new opportunity. We hope that society will find such a consensus as soon as possible.