Leap Year economicsSOHN HAE-YONG
The author is the content production editor of the JoongAng Ilbo.
This year is Leap Year, which returns every four years. February in 2020 has 29 days instead of 28 days. It is also the year of the Summer Olympics.
A leap year has significant economic effects, most notably the positive growth of the Japanese economy in the first quarter of 2016. While negative growth was expected due to the strong yen and global economic downturn that year, it turned out that the economy experienced surprising 0.4 percent growth compared to the same period the previous year. Nihon Keizai Shimbun reported that one extra day had the effect of boosting GDP by 0.3 percentage points in the first quarter.
The Summer Olympics, the biggest global sporting event, also plays a role. Sales of electronic items, such as televisions, go up, and rising consumption during the Olympic period plays a positive role in the global economy. In fact, the average global economic growth rate for four-year cycles for 48 years from 1972 to 2019 shows that growth rate of the Leap Year was the highest at 3.98 percent. Average growth of non-Leap Years is 3.3 to 3.4 percent, according to Organisation for Economic Cooperation and Development (OECD) data.
This year is a plus for the Korean economy as well. Exports, which have been in decline for 14 consecutive months, are expected to turn positive in February, with the extra business day.
But I think that’s about it. The negative impact from the coronavirus outbreak is far greater. Capital Economics lowered Korea’s growth rate for this year from 2.5 percent to 1.5 percent out of concern for shrinking exports, production and spending.
As emergency signals are on for the economy before the April 15 parliamentary elections, the ruling Democratic Party is considering a supplementary budget to boost the economy. In order to boost the growth rate, the government wants to create a kind of “artificial Leap Year effect” to prevent losing votes because of our economic downturn.
However, it is not easy to play the supplementary budget card now. It is still early in the year. “The ink on this year’s budget plan is not even dried,” as Vice Prime Minister for Economic Affairs Hong Nam-ki said. If pursued, it will be the sixth consecutive year with a supplementary budget. The budget has been in deficit for 12 consecutive years.
The government cannot delay the discussion on drafting another supplementary budget if the epidemic and consequent economic impact grow. But it should have criticism in mind. I want to quote President Moon Jae-in.
“This supplementary budget is solely because of the government’s incompetence. If the government had properly responded and hadn’t caused a loss in tax revenue because of economic failures, such an astronomical amount of taxpayers’ money would not have been added.”
JoongAng Ilbo, Feb. 13, Page 28