Economy not in safe zone yetThe nation’s gross domestic product in the third quarter grew 2.9 percent from the previous quarter - a huge increase that exceeded expectations. Compared to the same period in 2008, the GDP was up 0.6 percent, marking the first such uptick in a year.
Based on these encouraging signs, the Ministry of Strategy and Finance is hopeful that the nation’s annual economic growth rate will enter positive territory this year.
Korea’s improved GDP performance in the third quarter is significant, as it alleviates some concerns that growth will be stunted in the latter half of the year, when the effects of government investments and initiatives could fade.
Another encouraging sign can be found in the private sector, which appears to have grabbed the baton from a public sector that led the economic recovery during the first half of the year. Despite these developments, there are experts out there who are warning against overly optimistic expectations for the economy. They point out that the tax breaks given to people who swapped out their old vehicles for new ones created only a temporary boost to the economy.
While caution is indeed necessary, it’s hard to ignore the positive economic trends playing out in Korea as of late.
The amount of money publicly traded firms plan to spend on facility investments jumped 6.6 times in the third quarter compared to the previous three-month period.
Department stores saw their sales in the fall period rise 20 percent year-over-year. Despite a falling exchange rate, the amount of exports in September reached $34.5 billion - almost on par with the level before the economic crisis.
This active spending and investing combined with export growth helped boost the GDP to surprising levels in the third quarter.
But it remains a stretch to believe that our economy has entered a safe zone. The unemployment rate remains high, and growth without job creation will have its limits.
Oil prices have climbed to $80 per barrel, and the exchange rate with the U.S. dollar is down to around 1,170 won. Because of our nation’s deficit burden, it’s difficult to expect that the government will expand its budget any more. The U.S. government certainly has been reluctant to do so, and China is shifting toward trying to cool down its economy.
Considering these variables, this is not the time to relax. Efforts to encourage consumer spending and corporate investment should continue.
We’ve got a long way to go before our economy really begins to grow. Suffice to say, independent and sustainable economic growth won’t come automatically.