Rose-colored glassesThe government is disturbingly upbeat about economic growth next year.
It expects the economy to expand by around 5 percent and estimates that inflation will be capped at around 3 percent, according to an economic forecast and policy outline for 2011 that the Ministry of Strategy and Finance presented this week to President Lee Myung-bak.
Under the ministry’s outlook, Korea’s economy is poised for solid growth next year and will continue to recover from the global economic meltdown.
The problem, however, is that the ministry is more bullish than everyone else, which suggests that it is expecting a best-case scenario.
The Bank of Korea and the International Monetary Fund estimate growth of around 4.5 percent, while most local and international organizations expect it to come in closer to 4 percent.
The government, it seems, is out of touch with the realities of the economic situation, as its outlook is the rosiest out there.
The government said it is still optimistic enough about the nation’s economic performance next year that it will continue to push policies that are focused on driving growth and revitalizing the consumer market.
But its key polices for next year are hardly dedicated to fostering growth - rather, they are largely focused on easing the financial burden on households, continuing a strategy enacted last year.
Our government is very confident about the economy and will further accelerate efforts to support the working population.
However, too much economic confidence and optimism can lead to rash decisions and ineffective prioritization of certain economic policies, which can have the opposite effect of what was intended.
The government explained that the upbeat forecast reflects its will to further boost the economy. But the economy will not improve on the government’s will alone, especially when officials have yet to develop concrete policy plans to accomplish their goals.
Groundless optimism can make the government’s policies incoherent and irrelevant and can lead officials to take a lax approach. The government has warned of external uncertainties that could affect the local economy. It should therefore focus on measures to protect the economy against external risks. Failure to do so could cost the country credibility and cause the government’s plans to backfire.