Wait until when?The Monetary Policy Board of the Bank of Korea reached a painful decision on Thursday after weighing several factors at home and abroad affecting our economy. Given the strong need to control skyrocketing real estate prices, particularly in the posh Gangnam districts, it should have raised its benchmark interest rate, which has been fixed at 1.5 percent for nearly a year. But it could not lift the primary lending rate in consideration of ever-grimmer economic prospects.
The central bank lowered growth prospects for our economy to 2.7 percent this year as well as next year from 2.9 percent and 2.8 percent, respectively, earlier. Initially, our growth prospects for this year were fixed at 3.0 percent, but they went down to 2.7 percent in three months after another drop in July. To make matters worse, the prospects for new hires this year were even gloomier, as seen in the drastic decline of the figure to 90,000 in October from 180,000 in July, 260,000 in April, and 300,000 in January. Such a shrinkage bodes ill for the future of our economy.
In fact, the Bank of Korea’s dark outlook for the economy is not new. A number of economic research institutes at home and abroad already warned about the worsening prospects. Nevertheless, the liberal Moon Jae-in administration is adhering to its reckless policy experiments — the so-called income-led growth and its pro-labor and anti-market policies, for instance — after turning a blind eye to such chilling realities.
The markets think that the Monetary Policy Board of the central bank will most likely raise the benchmark rate in November. But the economy is not expected to show a dramatic turnaround. That’s why monetary experts say that the board’s decision to freeze the rate will help constrict the central bank’s maneuverability in monetary policy.
The Moon administration must find the answer in revitalizing our economic fundamentals rather than relying on low interest rates. The responsibility for improving our economic vitality through policies falls on the shoulders of the government. President Moon’s Policy Chief Jang Ha-sung, the mastermind of the untested experiment of income-led growth, asked the public to wait until the end of the year to see the fruits of the policy after the employment rate fell to an abysmal level. We want to ask him if the public can really wait until then while red lights are flashing on three key indicators — growth, employment and investment.
JoongAng Ilbo, Oct. 19, Page 34