Behind the dataKorea’s gross domestic product (GDP) after interest rate adjustments rose 7.2 percent in the second quarter from the same period a year earlier, which seems to signal that the local economy is well along the road to recovery.
But gross national income (GNI), which includes money generated from external trade and international business, grew at a relatively slower pace of 5.4 percent.
The figures help explain why Koreans’ monthly pay has been relatively stagnant. Growth in terms of GDP has improved markedly, but it has done little to fatten our wallets and savings accounts.
The preliminary statistics, released by the Bank of Korea, highlight the gap between statistics and reality. GDP grew 1.4 percent in the second quarter from the first three months of the year, but GNI edged up just 0.5 percent - or roughly one-third the amount of gross domestic product growth.
So it’s no wonder that consumers have seen little improvement in their everyday lives despite government fanfare about nominal GDP growth, which hasn’t been adjusted for inflation.
The biggest reason for the slow recovery in GNI is that prices for imports rose faster than those for exports. The index for net commodities terms fell 3.9 percentage points in the second quarter over the year-ago period. The deterioration of trade terms in a country that depends heavily on exports to drive economic growth has widened the gap between statistics and reality.
The challenge now is to figure out how to close, or at least narrow, that gap.
It’s difficult for exporters to raise shipment prices, as they must maintain a competitive edge in the global market. But it is also impossible to lower internationally standardized import prices.
And we cannot reduce our reliance on imports substantially, as that could in effect jeopardize exporters, which have helped prop up our economy.
The only solution therefore is to boost local demand. Of course, our exporters must be left free to compete on the international stage through price competitiveness. But the local market should be enlarged to help create jobs and boost income regardless of global economic demand.
The economy will be able to move forward only when we see balanced income growth both at home and abroad. The only way to boost local demand is to nurture medical, education, tourism and legal services.
If the government is really serious about helping the lives of ordinary people, it should focus on bolstering up-and-coming sectors at home.