Misdiagnosed economy

The Korean economy is wobbling as both of its wheels — exports and domestic demand — quickly lose air. Job conditions are at their worst since the aftermath of the global financial crisis in late 2008.

Worse still, the policymakers at the wheel seem oblivious. According to the monthly outlook on economic conditions for July, the Ministry of Strategy and Finance acknowledged rising uncertainties from the trade conflict between the United States and China but stayed upbeat about steady recovery by pointing to growth in overall industrial activity.

But what data is the government looking at by claiming the economy has been on track for recovery since December? Over the last six months, jobs have been worsening.

Since February, jobs slightly over 100,000 jobs have been added compared to a year ago. Job growth in the first half was halved against the same period last year. The 16.4 percent hike in the minimum wage wiped out jobs at restaurants and, in the wider hospitality segment, tens of thousands of workers are out of a job.

The manufacturing sector is devastated. Factories are running at slightly over 70 percent of their full capacity, up to 15 percentage points below levels in rivaling countries. As a result, jobs have been lost. The exports that sustained the economy amid sluggish domestic demand have turned shaky.

Korea inevitably will suffer due to the tariff war between the United States and China, two markets that are responsible for 40 percent of Korean exports. Except for semiconductors and ICT products, other mainstay Korean exports have been on the decline. The Bank of Korea downgraded its growth estimate to 2.9 percent for this year and 2.8 percent for next year.

Despite the obvious danger the economy is heading toward, the Finance Ministry remains upbeat by flagging the headline industrial data. It neglected to point out that facility investment and retail sales hover in the negative zone. Moreover, construction investment — the only positive growth on domestic demand — has been easing due to a swathe of new regulations on real estate.

An illness cannot be cured if the doctor does not diagnose the patient correctly. The government must correct its groundless optimism and examine the economic reality with reason. It must take back anti-market and anti-business measures and work on ways to pull the economy out of this dangerous pit before it is too late.

JoongAng Sunday, July 14, Page 34