The economy slowsThe Bank of Korea (BOK) has lowered its outlook for economic growth this year to 2.2 percent from 2.5 percent — the lowest since 2009 when the country suffered a financial crisis triggered by the Wall Street meltdown — due to slowed exports and investment. The central bank expects our facilities investment to contract by 5.5 percent compared to a year before, which means quality jobs in the manufacturing sector will decrease, not increase. The bank also cut its projection for inflation to 0.7 percent from 1.1 percent.
Due to the clouds over our economy, the BOK has presented prescriptions such as cutting interest rates. Yet the markets are wondering if such a rate cut will prove effective in boosting the economy. The central bank’s decision also narrows the room for a further cut in the rate given the relatively higher U.S. interest rate, which already stands at 2.25 to 2.5 percent. In case foreign capital flees Korea in search of higher interest rates, that can shake our financial markets.
To avoid that, our economy must grow. But that’s not easy due to local companies’ unwillingness to invest in Korea. Employment has been barely maintained through the liberal administration’s hefty spending on creating part-time jobs, mostly in the public sector. Some analysts forecast an additional 0.8 percentage point drop in our growth rate if Japan accelerates economic retaliations against Korea in return for the Supreme Court’s rulings on wartime forced labor. In the meantime, the U.S. economy is enjoying its lowest unemployment in 50 years, and record-breaking stock closes day after day. And yet the Federal Reserve wants to lower the Fed rate further to avert any potential downsides, which can cause a big headache for Korea.
We have no choice but to accelerate our growth. The liberal Moon Jae-in administration is chanting “innovative growth” but to no avail, as evidenced by its half-baked measures to allow car-sharing and ride-sharing services. Lights are automatically turned off at 6 p.m. in R&D centers across the country after the implementation of the 52-hour workweek. Under such circumstances, researchers cannot find ways to innovate.
Innovation confronts layers of regulations. The gridlock was best summarized by Korea Chamber of Commerce and Industry Chairman Park Yong-maan, who compared it a “comic situation in which starting a new venture itself is a big achievement for entrepreneurs.” The president must fire ministers known for their underperformance. Otherwise, he — and the country — cannot hope for a better future.
JoongAng Ilbo, July 19, Page 30
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