Engineering the future

The government has fixed its economic direction for next year and wants to catch two rabbits - revitalizing the economy and raising our growth potential - at the same time. It shifted its focus from stopgap measures to structural reforms. The government designated four reforms of the labor market, public pensions, education and finance as top priorities from a long-term perspective. Vice Prime Minister for the Economy and Finance Minister Choi Kyung-hwan stressed that without reinventing the four pillars of our society, our economy has no future.

The government’s forecast for next year’s economy is not that gloomy, as seen in its estimated growth rate of 3.8 percent. Though lower than its earlier estimate of 4 percent, it’s still better than that of countries in the Organization for Economic Cooperation and Development. Macroeconomic indicators for employment, prices and the current account balance are not pessimistic either, as seen in the government’s forecast of a 66.2 percent overall employment rate - higher than this year’s 65.3 percent - and an $82 billion surplus in the current account thanks to plummeting oil prices.

However, such indicators are not sustainable because of the opaque future of the world economy stemming from potential crises in Russia and other emerging economies due to the plunging petroleum prices; the U.S. government’s interest rate hikes in the first half of next year; prolonged recession in Europe; slowed growth in China; and the accelerated depreciation of the Japanese yen.

The domestic situation is arguably darker. Our economy is losing its vitality due to swelling household debts, a rapidly ageing population and low birthrates, not to mention poor consumer confidence. In addition, our core manufacturing industries like smartphones, shipbuilding and steel-making are on a downward spiral.

To overcome these structural problems, ordinary prescriptions are not enough. That’s why the government has set such ambitious goals. The key to our future prosperity can be found in creating more jobs and better incomes through drastic deregulation and bolstering our services industries.

The biggest challenge comes from the restructuring front - especially reform of the labor market - as it involves sensitive issues like extending the retirement age, giving a better deal to the non-salaried workforce and enhancing labor liquidity. Despite the government’s promise to reach a grand consensus on those issues, no progress has been made. Management, labor and the government must strike a deal before it’s too late.

JoongAng Ilbo, Dec. 23, Page 38