[Viewpoint] Hazards of economic predictions

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[Viewpoint] Hazards of economic predictions

The year 2009 is about to come to a close and a new year is just around the corner. At this time each year, several organizations begin to release new economic forecasts for the new year.

Though they tend to be consistently wrong, they still attract our attention due to our expectations that a better year is on the horizon.

Simply, if we have a better future in store, we may be more willing to endure the hardships that are manifest in a world otherwise filled with uncertainties.

However, the nation’s economic outlook for 2009 released at this time last year proved to be ineffective for such a purpose.

While the global financial meltdown was spreading like wildfire, growth predictions went to both extremes - anywhere from plus or minus 3 percentage points. Rather than helping, the economic outlook aggravated the situation and caused uncertainty.

In this very column at that time, I advised that it would be in one’s self interest to choose one of the best and the worst scenarios.

Although it was a truly tongue-in-cheek advice, it was a fairly safe method of prediction.

You can wager that the real economy will progress somewhere between the best and worst situations, so there was little possibility of being wrong.

However, ironically, the path our economy has taken this year stood in the middle between the worst-case and best-case scenarios.

The growth rate of the Korean economy was considerably negative in the first half of the year, but returned to the black in the second half.

As a whole, the prediction is that the nation experienced nearly zero growth last year.

Although it is a prediction, we can trust in this number because it is very unlikely to change within the remaining month. Zero percent growth means that the economic scale will become neither bigger nor smaller than last year.

The Korean economy has seen no remarkable progress but has never been shrinking faster than expected this year.

However, compared to the fact that major advanced countries failed to avoid negative growth this year amid the financial upheaval, we should find solace in the fact that we have done a fairly good job.

Predictions of the nation’s economic outlook for the new year will also come without fail by the end of this year.

There is no need to get overly excited or disappointed in the different prediction by different organizations. However, we have high expectations for the next year and are anxious to find a basis for this optimism.

Fortunately, different types of economic predictions by organizations will never go to both extremes like last year.

This is because many people predict that the economy will continue recovering from a slump. The only difference may lie in where to set concrete goals.

The Korea Development Institute was brave enough to step up to the plate and take a stand.

Next year’s predicted growth rate by the KDI is 5.5 percent, which is quite higher than the 2.2 percent growth in 2008, let alone the zero growth in 2009.

We are pleased at the news that our economy will enjoy a rapid economic recovery next year. However, it is too early to be satisfied with such predictions.

As mentioned by the KDI, a variety of assumptions and unpredictable uncertainties lie behind this positive economic outlook.

In addition, although the economy may grow at the predicted pace, the condition of our economy will not improve immediately.

Despite the growth rate of about 5.5 percent assumed for next year, we achieved almost no growth during 2009 and only generated an average growth rate of 3 percent for the past two years.

That figure falls short of 4 percent that is said to absorb employment without aggravating inflation.

However, we find it difficult to feel confident that the expected 5.5 percent growth rate is the indicator for the revival of our economy, although it is a seemingly high growth rate.

The employment issue will remain unsolved next year as well.

This is the reason why we are still eager to achieve more economic growth despite the relatively high growth predictions.

We still require growth factor support that goes far beyond our expectations.

Growth is the only means to create more jobs, end the low birthrate, address an aging population and balance local development.


*The writer is an editorial writer of the JoongAng Ilbo.

by Kim Jong-soo
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