Put the economy firstProspects for the Korean economy next year are turning bleaker. In its recent world economy outlook, the Organization for the Economic Cooperation and Development cut growth estimate for the Korean economy to 2.6 percent from 3.0 percent. It cited sluggishness in external commerce, administrative dysfunction due to the Choi Soon-sil scandal, deterioration in the real estate market, corporate restructuring, and the new anti-graft law for the downside to the economy.
The Korea Institute for Industrial Economics and Trade on similar grounds predicted the local economy to grow 2.5 percent at best next year. Others are equally grim — 2.8 percent by the Bank of Korea, 2.7 percent by the Korea Development Institute, 2.2 percent by LG Economic Research Institute, and 2.6 percent by Hyundai Research Institute. They warned of a further downgrade down the road. Some of the foreign investment banks predict the growth to be as slow as 1.5 percent. The government target of 3.0 percent has long been dismissed.
Conditions have turned from bad to worse. Consumer sentiment has dipped to the worst since the 2008 financial crisis. The Business Sentiment Index, a barometer for local manufacturers, has been hovering at 70, further away from the 100 threshold that suggests more optimism than pessimism. Overseas construction orders have shrunk to $23.3 billion this year from $71.6 billion. Household debt increases remain unfazed despite rising interest rates. External trade conditions are worsening due to imminent hikes in U.S. interest rates and tougher trade barriers.
Korea, however, lacks the leadership to fight the hard battle on the economic front. The title of the deputy prime minister for economy has been shared by incumbent and nominated figures for nearly a month. The rivaling parties are wrangling over a hike in corporate tax and a free day care subsidy on the proposal for next year’s budget bill. The labor reform bills have been discarded and the bipartisan bill on creating a regulation-free zone also shelved.
The political scandal over the president and her friend has brought a standstill to economic governance. Nevertheless, the president and rivaling parties pay little attention to the economy and the livelihoods of the people as they are busy chasing self and political interests. If the economy is wrecked on top of the crippled governance, there may not be any hope left. Politicians must put aside differences for the common imperative of tending to the economy.
JoongAng Ilbo, Dec. 1, Page 38