Feeling the heatThe Korean economy is rapidly headed into recession as a result of a critical lack of economic vitality and the government’s relentless pushing of anti-market policies. We are utterly frustrated at such a grim turn, which the country has never faced in the last half century. Economic indicators show the sad reality of our economy. Exports — the lifeline of the economy — have been declining for 12 consecutive months while the consumer price index, a barometer of economic vitality, has been stuck in the zero percent range for 11 months in a row. In the meantime, jobs for people in their 30s and 40s — the backbone of our economy — have been decreasing for the last 25 months.
The GDP deflator, a measure of price inflation, has recorded negative growth for four consecutive quarters for the first time since 1961. That means that our economic conditions — including production, consumption and investment — are all worsening. That’s a stark warning that our once-vibrant economy has started to lose growth momentum, something Korea has never experienced — even during our most serious economic crisis in the late 1990s.
Temporary external shocks such as a steep rise in international crude oil prices can be overcome. But it’s much harder to overcome a sapping of the vitality of the economy.
To make matters worse, our birthrate has nosedived to 0.88 while baby boomers will begin to retire en masse starting next year. Even if massive capital and labor are poured into the public and private sectors, the effect would be quite limited in such circumstances.
Rumors spread in our financial sector this summer that international credit rating agencies are beginning to lower the credit rating of Korean companies. On Wednesday, Standard & Poor’s warned that deflation threatens our economy. The Financial Times was pessimistic about the future of our economy after it recorded paltry growth of less than 3 percent for two consecutive years. “The South Korean economy is on track for one of its worst two-year growth periods in more than half a century,” said the paper. Bloomberg wondered, “How can the land of K-Pop fail to innovate?”
The Moon Jae-in administration must prioritize economic stability over ideology. The answer is obvious. The government must end its ill-conceived income-led growth policies and accelerate deregulation. The Blue House must appoint someone with economic expertise as prime minister. Otherwise, we will all be frogs in the pot of water — with the water temperature rising fast.