One hand clappingConcerns about an exodus from Korea are deepening as foreign investors sell Korean stocks at an alarming pace. They have been net selling Korean shares every single trading day since Nov. 7. The amount of the accumulated net selling has already exceeded 5 trillion won ($4.2 billion). As a result, the Korean stock market is critically wounded as seen in the 4 percent drop in the Kospi since the stampede began last month. Foreign investors are even selling Korea’s government bond futures, sending signals that our national bonds will lose their value.
Foreign investors’ rush to sell Korean stocks and bonds reflects their worries about the future of our economy. It remains to be seen if the economy can show even 2 percent growth this year. The economy is expected to grow barely over 2 percent in 2020 too. That’s our lowest growth since 1954, a year after the end of the Korean War. The Financial Times called it the worst performance of the Korean economy in half a century.
Such a lethargic state is partly the result of external factors like a protracted trade war between China and the United States and low prices for semiconductors, our mainstay export item. But the crisis was triggered by repeated policy failures of the Moon Jae-in administration. Its insistence on so-called income-led growth has brought about disaster. Last year alone, 42,400 full-time jobs at convenience stores across the nation disappeared due to the government’s relentless pushing of minimum wage hikes. The liberal administration’s pro-labor and anti-corporate policies helped dampen investments by companies. Facilities investment has been declining for 12 consecutive months. Korea Inc. is collapsing.
A critical loss of jobs led to a considerable reduction in household incomes and consumption. As prices do not rise due to sluggish demand, the specter of deflation is looming. The economy may achieve a meager 2 percent growth rate this year — that thanks to the government’s massive spending of taxpayers’ money. The fear of so-called Japanification — a long and excruciating recession — is rapidly spreading due to the government’s mindless experiments on our otherwise resilient economy.
In such dire circumstances, the government is still engrossed in patting itself on the back. The presidential Special Committee on Income-led Growth staged an international conference Wednesday to show off the outcome of the government’s income-led growth policy, which has actually backfired. On the same day, Prime Minister for Economic Affairs Hong Nam-ki was busy bragging about the accomplishments, albeit minimal, of the government’s innovative growth strategy. Would foreign investors rush to sell Korean stocks if our economy really achieved reliable growth?
The government’s endless self-praise reflects nothing but obstinacy — a refusal to abandon obviously bad policies. If it does not change course, the economy will not rebound. And yet the government is steadfast even in the face of foreign capital flight. It has chutzpah — but we are paying the price.
JoongAng Ilbo, Dec. 6, Page 34