Feel the fear and do it anyway

As banks and think tanks continue to downgrade their outlooks on the Korean economy for next year, its growth prospects remain bleak. Following a similar move by the state-run Korea Development Institute, the Bank of Korea has cut its growth outlook for next year’s gross domestic product by 0.9 percentage points to 3.7 percent. Exports are likely to face more bad news as growth drops from 19.4 percent this year to around 4 percent, the central bank said.

Moreover, the current account surplus is estimated to decline by more than 50 percent from this year’s estimated $27.2 billion to $13 billion. And the BOK added that if external market conditions worsen, the country’s prospects will also dim further. In a situation where the European fiscal crisis is wreaking havoc on the global economy, Korea’s export-driven economy can hardly be expected to remain immune to such external shocks. The negative side effects will also be felt in the job market next year.

However, it is not satisfactory to simply sit by and watch the economy deteriorate. Such economic forecasts are mostly based on textbook theories, and the country’s course can be changed for the better if those steering the carriage redouble their efforts and focus on strengthening the domestic market.

Exporters should continue to boost their competitiveness, and the government must accelerate restructuring and deregulation to give domestic industries a boost. At the same time, the existing barriers for domestic services in fields such as medicine, tourism, education and the law should be lowered significantly. The more red tape that is eliminated, the bigger the domestic market will be able to grow.

Fretting about the future will do nothing to aid the economy. Rather, bold and aggressive steps are required to lay a foundation for a better tomorrow. Even pessimistic economic pundit Nouriel Roubini, a professor at New York University, has proposed economic growth as the solution to an economic crisis.

Now the government must offer incentives to encourage large, cash-rich companies to invest aggressively, while exercising flexibility in how it wields its financial and fiscal policy tools. Without this strong push, the economy will not be able to regain enough impetus to generate jobs and stay on the right track. Being passive will only precipitate a crisis. Korea has ample experience of turning a crisis into a new opportunity, and while other countries find themselves crippled by fear, Korea must take this as an opportunity to make another leap forward.