Stay on guardThe South Korean economy stayed resilient despite escalated geopolitical risks from North Korean nuclear and missile threats. Its gross domestic product grew 1.4 percent in the third quarter from the previous three-month period, the biggest quarterly growth in more than seven years. Many predicted that the economy would grow 1 percent at best. The third-quarter performance sets the economy in the path of exceeding the targeted 3.0 percent growth for the full year. The economy would be boasting growth above 3.0 percent for the first time in three years. That will be a relief for the new government under President Moon Jae-in in its first year. The recovery of global economy has aided exports and the economy. The four governments over the last 20 years failed to achieve annualized economic growth of more than 3.0 percent in their first year because of unfavorable external conditions. The better-than-expected growth rate also places the central bank in a position to lift the policy rate from the record-low level within the year.
But authorities must not let their guard down just because third-quarter data proved to be stronger than expected. The economy mostly benefited from a global boom in memory chips and petrochemicals and the supplementary budget. Private consumption edged up a mere 0.7 percent. Spending sentiment has not fully recovered as uncertainties linger. Construction investment that contributed to the better-than-expected domestic demand data would likely retreat due to government measures to regulate speculative real estate investment and housing loans and reduced infrastructure spending.
Upon returning from the Chuseok holiday break early this month, Moon emphasized the need for growth to help improve livelihoods. He asked his aides to work toward running the economy above a 3.0 percent rate and directed growth to aid jobs and income for the population. His comments came as his economic agenda mostly centered on left-leaning policies to strengthen labor rights. Although we must not cling too much to growth data, the economy must keep up growth as to increase hiring and income. To increase social welfare programs, tax revenue must grow from economic activities.
The economy has been in slow motion for years. The growth pace fell to 3.7 percent in 2011, and aside from 2014, the economy has been performing under 3.0 percent. Regulations must be eased and innovations promoted to hone productivity and raise growth potentials. The government must accelerate its policy promoting innovations. Authorities must not waste the growth momentum and must accelerate with actions to restructure economic fundamentals.
JoongAng Ilbo, Oct. 27, Page 38