Wanted: Sense of economic urgencyEconomic prospects are ever darkening. The Asian Development Bank recently sharply revised downward South Korea’s growth forecast to 2.8 percent from its 3.4 percent estimate last October. The revised rate is the second-slowest among the 11 largest Asian countries, aside from Japan, which is mired in recession. The regional economy on average is expected to grow 6.6 percent. While Singapore’s GDP projection is a mere 2.6 percent for this year, it boasts one of the world’s largest per-capita incomes ($51,162), more than double that of South Korea ($23,113). Once one of the most vibrant economies in Asia, South Korea might soon draw sneers from regional peers.
Ernst & Young, one of the Big Four accounting firms, cut its growth forecast for South Korea to 2.2 percent from 3.3 percent just three months ago. That is below even the 2.3 percent the government estimated last month in its pitch for a supplemental budget to compensate for an expected shortfall in tax revenue. The Park Geun-hye government just might have boarded a sinking economic ship.
The captain of the ship, however, seems to be at a loss to fight the crisis. The government’s proposed supplemental budget is intended more to mitigate the decline than to kick-start the stalled economy. Its real estate stimulus proposal also is not likely to breathe much life into the comatose housing market. Exports have been hit by the double whammy of decreased investment and a weak yen. Domestic demand remains sluggish, with corporations and consumers alike lacking the confidence to spend.
Despite such urgency, the Bank of Korea remains out of sync with the government and the legislative branch is busy drawing up various bills that would hinder corporate activities and investment. Various authorities pledge tougher tax audits and regulations while pressuring companies to increase hiring and investment. Under these circumstances, it would take a miracle to save an economy whose vitality is being sapped by worsening indicators and government incompetence. Management and labor alike seem to have lost the will to turn things around. If such lethargy continues, the economy will remain stuck in a slowdown and heading toward recession.
What’s worse is that the government seems to lack any sense of urgency as the economy is being dragged down by an aging society and the absence of a vision for revitalizing growth. The government should come up with effective immediate, mid- and long-term strategies, rather than merely regurgitating unfeasible campaign promises.