An economic rise seen but not felt

South Korea’s economy performed better than expected last year, with the gross domestic product growing at 3 percent rather than the earlier announced 2.8 percent. According to revised figures released by the Bank of Korea, per capita gross national income hit a three-year high of $26,205 last year through a year-on-year gain of 4 percent.

It is the first time above $25,000 since per capital income first recorded above the $20,000 threshold in 2010. But the data does not reflect any improvement in real economy as the figures only look better on paper under new international calculation criteria. The country’s structural weaknesses and problems remain the same. Even under revised statistics, growth engines remain fragile and household income is declining. The economy last year grew primarily on exports and construction investment, with capital investment and consumer spending in the dumps. Capital investment - corporate spending that is pivotal in domestic demand - fell 1.5 percent year-on-year. Household share fell against the gross national income, underscoring that any improvements in the economy have failed to have any trickle-down effect on consumers. Household income accounted for 61.2 percent of the gross income last year, compared with 63.5 percent in 2007. Because the income increase rate failed to keep up with the growth in output, most people aren’t likely to notice that the economy is improving. In order for Koreans to sense improvements in the economy beyond the data, the benefits of growth must translate into increases in income for households. President Park Geun-hye and her government promised to revitalize domestic demand by developing growth potential through a three-year economic reform plan. The central bank expects the economy to grow 3.8 percent this year. But without expanding domestic demand, the economy would remain susceptible to external circumstances and growth won’t help to boost household income. Deregulation and liberalization to expand and bolster domestic demand and the services market will be key to real growth in the economy and income.

JoongAng Ilbo, March 28, Page 34