Revitalize Korea Inc.The IMF released a grim outlook for the global economy. It projected a 3 percent fall in the global economy this year — the worst since the Great Depression in the 1930s — in a devastating fallout from the coronavirus pandemic. Korea’s economy was estimated to slip 1.2 percent against a year ago, the first contraction since the 1998 financial crisis and oil shock in 1980. The dismal outlook would complicate things for the government which has increased welfare spending to an unseen level.
Authorities are naïve to believe that the crisis could be managed through fiscal and monetary expansion. Ammunitions are not sufficient. Effects also won’t be that big. During the times of past economic crises, the national debt ratio against GDP had been at 10 percent and interest rates were high then. But now, the national debt ratio against GDP has topped 40 percent of GDP and fiscal deficit has been swelling. Interest rates are under 1 percent, a record level. In such circumstances, fiscal and monetary policies can have a limited impact on helping the economy.
There are not many choices left. There is no use wrangling over ideology when all-out endeavors are needed to combat the worst crisis. Now that the parliamentary elections are over, bipartisanship is necessary to fight the common challenge facing our economy. Political reasoning should be pushed aside so as not to cause diversion in the operation to save the economy. Any policies that can be harmful to the weak economy must be fixed.
Colossal tax spending alone cannot fend off the perfect storm. Infrastructure jobs helped revive the economy after the Great Depression. But that kind of demand is nowhere to be seen. Relief funds and temporary work such as street cleaning jobs can provide immediate comfort, but cannot be a protection against the pandemic. Countries are rapidly readying for the post-coronavirus era. The migration to the digitalization and automation age will accelerate. China has vowed to mass-produce NAND flash memory within the year to help restore the economy.
Revived corporate sentiment will be the best solution. Jobs are created by companies. The government’s income-led growth policy that are hurtful on companies should be stopped. Instead, companies must become unchained to build up resilience against present and future challenges. Our IT sector blossomed after Kosdaq entry barriers were removed after the 2008 financial crisis. Without improvements in economic fundamentals, the challenges cannot be fought. There is always the window of opportunities in crisis.