The shadow behind the sun

An upswing in the latest economic data has fueled expectations that we’ll soon see a turnaround in the local economy.

A top government official added weight to this renewal of confidence, predicting the economy would return to positive growth territory earlier than expected.

Minister of Finance and Strategy Yoon Jeung-hyun told a news editors’ forum on Friday that the period of negative growth could end soon, given the signs of a slowdown.

The government has so far been conservative in its assessments of the pace of recovery, and Yoon’s comments hint at a possible change in its economic forecast.

But there is a dark shadow behind the budding optimism, leaving behind doubts that can only serve to delay restructuring efforts.

Yoon’s reference to the end of negative growth appears related to first-quarter numbers.

The country’s gross domestic product contracted 5.1 percent in the final quarter of 2008 from the previous three months.

In the first three months this year, it grew 0.1 percent. The economy is gradually improving from quarter to quarter, although at a snail’s pace, and is expected to maintain its upward incline.

But as Yoon mentioned, the signs of a recovery remain feeble and the country is still most likely to see an overall contraction in annual growth this year.

The Korea Development Institute, a state-run think tank, is predicting that the GDP will fall 2.3 percent this year.

The reality remains bleak, and predictions of a first-quarter turnaround appear to be premature. At this stage, there is no need for excessive hope and confusion.

Based on signs of improvement in the economic data and an increase in market confidence, some large business groups have been showing signs of retreating from their original restructuring plans.

But Yoon was correct in saying that corporate restructuring is no longer a choice but an obligation that will determine the viability of our economy. He should also have underscored the importance of expediting the restructuring process so that companies can position themselves to better compete in the global market.

Kim Jong-chang, governor of the Financial Supervisory Service, also sent out a warning last week to business groups that are spearheading halfhearted reform measures. If you want it all, you can lose it all, he said.

The government should stop trying to make predictions about the economy and take action to urge corporations to restructure. Otherwise, the gains that have been made will disappear in all of that optimistic back-slapping.