Playtime is over, MoonThe Black Thursday rout across Asian markets following an overnight crash in Wall Street sent Korean stock prices and won to their lowest level in more than a year. A panicky selling spree dominated the market, and analysts predict the bear run could last for some time.
Authorities must calmly study the economic reality to come up with practical solutions. There is no other option than the standard action to strengthen economic fundamentals. The novel economic theories of the Moon Jae-in administration have caused havoc. Amid the obvious negative impact, authorities must change course in economic policy.
The main Kospi closed 4.4 percent down on Thursday at 2,129.67, the lowest since April last year. The secondary Kosdaq index lost 5.4 percent to finish at 707.38. Foreign investors net sold nearly 500 billion won ($437 million) worth of Kospi shares. Over the last eight trading sessions, foreigners dumped more than 2.6 trillion won worth of Kospi shares. The won sharply retreated, finishing 10.4 lower at 1,144.4 against the U.S. dollar, its weakest since September last year.
Markets rocked amid uncertainty about the global economy. The International Monetary Fund (IMF) cut this year’s estimate for global economic growth to 3.7 percent from previous 3.9 percent. It lowered its estimate for Korea’s growth by the same margin to 2.8 percent as the export-reliant economy will take a direct hit from reduced global demand.
External events will devastate the Korean economy struggling with domestic woes. The growth engine has lost steam and job conditions show little sign of hope. Job additions have stayed at a pitiful level after slumping to 5,000 in July and 3,000 in August, compared with the monthly average of 300,000 in the previous year. Job growth in September stopped at 45,000, slightly improving from the previous month. Facility investment has been skidding for the longest period in nearly 20 years. Consumption is stagnant.
The government is in denial, repeating the mantra that the economy has been on a steady recovery. It obsessively defends income-led growth, but income should come from growth, not the other way around. Companies must invest and hire to generate growth in wages and spur spending.
Authorities must lift regulations and reform ailing industry and labor sectors no matter how unpopular the move may be. Despite its rhetoric, the government has been slow in deregulation to spur innovation. Crisis always opens a window for opportunity. The looming crisis should accelerate deregulation to create new business opportunities and investment.
JoongAng Ilbo, Oct. 12, Page 30