It’s restructuring time

President Park Geun-hye has named economic vitality as her top priority for 2015 and vowed to establish the foundations of an era of $40,000 per capita income for Korea. Her remarks translate into a pledge to overcome low growth by reigniting the pilot light of our economic engine and pave the way to becoming a truly advanced economy. We fully share her sense of desperation and determination to put our lackluster economy back on track.

However, determination and pledges alone can hardly solve the Gordian Knot. The Korean economy has been suffering from the chronic problems of low birthrates, a rapidly ageing population and high costs, coupled with a long slump. In order to turn the economy around, the government must tackle extremely tough challenges like a massive restructuring of the public and private sectors and a colossal revamping of our economic fundamentals.

The government has lowered its estimated growth potential from 4 percent to 3.8 percent. But most economic research agencies forecast estimates in the mid-3 percent range. Even that conservative number can’t be achieved, they warn, if external factors adversely affect our economy and if the government fails on the structural reform front. Standard & Poor’s has even come up with the dire prediction that our growth rate may plunge to 2.3 percent under a worst-case scenario.

The world economy is awash in bad trends, except for the rebounding U.S. economy. Thomson Reuters, the news agency, attributes global jitters to several factors like Russia’s crisis over plummeting oil prices, Uncle Sam’s raising of interest rates, a hard landing for China’s economy and a recurrence of financial woes in the eurozone. All of these pose threats to our economy. Despite some potential benefits from the fall in petroleum prices, we cannot be so happy about that trend as it leads to lower prices in the short term, which in Korea’s case could build deflationary pressure.

Under such circumstances, it is not going to be easy to push restructuring. But the government cannot delay. It already promised to kick off a full-fledged restructuring from this year. Reforms of the public sector and labor markets have already begun. What is important here is a leader’s strong dedication to reform and a sure course of action. If a commander-in-chief’s resolution is shaken - and if the action plans are not backed by a carefully choreographed sequence - the job can never get done. With no major elections scheduled, this year is the last chance for the president to kick-start her economic mission.

JoongAng Ilbo, Jan. 2, Page 30