The revenue disparityThe data have turned positive, defying concerns about a looming economic crisis in April. The stock market is at its best and housing prices are rising, thanks to the recovery in the global economy. The U.S. economy has picked up speed as a result of Washington’s all-out monetary stimuli. The Chinese economy also has avoided a hard landing. Hiring and investment in Japan are active. The eurozone also has recovered from a fiscal crisis.
Global trade has picked due to recoveries in major economies. It is estimated to grow by 3.8 percent this year from last year’s 1.9 percent. The ramifications have finally reached Korean shores. Exports have grown by double-digits for four straight months. As factory activity has gained vitality, our industrial output also rose for four months in a row. Facility investment jumped 12.9 percent in March, the biggest increase since October 2013.
Institutions are now upgrading their skeptical estimates on the Korean economy. Some may predict 3 percent as a possibility for this year. But the fundamentals haven’t changed.
Washington is set to revisit the free trade agreement with Korea. A study estimated that Korea could lose 19 trillion won ($16.7 billion) in exports and 160,000 jobs in the next five years if tariff rates are upped as a result of renegotiations. A report by the Korea Chamber of Commerce and Industry showed that due to offshoring, the number of jobs Korean companies created overseas in 2015 was 1.35 million more than foreign companies did in Korea.
The household debt of 1,340 trillion won also could be adversely affected by increases in interest rates by the U.S. Federal Reserve. Korean companies are struggling in China due to its economic retaliation over Korea’s installment of the Thaad system. Daewoo Shipbuilding & Marine Engineering still hangs on a bailout. Other troubled companies also call for restructuring.
The Korean composite stock price index hit a historic high led by exporters of semiconductors, petrochemicals and steel on demand overseas. But these exporters do not help much in hiring, nor translate into improvement in our household income and spending as well as our debt, unemployment and inequality.
We must not be fooled by the data. We must stop relying too much on those overseas to run the economy. We must use the recovery momentum to upgrade the fundamentals of the domestic economy.
JoongAng Ilbo, May 5, Page 26