Time for deregulationIn a shocking sign, Korea’s GDP contracted 1.4 percent in the first quarter compared to the previous quarter. The economy has yet to go into negative territory when growth is compared to the previous year. So far, it has some steam. But the steam seems to be running out quickly, even before the shocks from the new coronavirus are fully materialized.
The Korean economy will most likely show further weakening in the second quarter and beyond. The economies of the United States, Europe and Japan are expected to decline by 5 percent to 9 percent this year. As a result, Standard & Poor’s has lowered Korea’s projected growth rate this year to minus 1.5 percent. Korea’s growth rate can hardly rebound given its heavy reliance on exports, which have been precipitously declining due to a critical dearth of demand from overseas.
After five emergency economic meetings at the Blue House, the Moon Jae-in administration has decided to inject a whopping 240 trillion won ($195.2 billion) to the market to help Korea Inc. stay afloat. The government also plans to hand out 1 million won to each household and pour in 40 trillion won to help Korea’s seven mainstay industries — including shipping and shipbuilding — to stabilize their businesses. The massive inputs of money show the acute impact of the novel coronavirus on our economy.
The Covid-19 shocks are shaking the very foundations of our economy. But the government must understand that a short-term injection of liquidity alone can hardly address the ever-deepening crisis. The country faces an unprecedented crisis that may not be comparable to previous ones. In 1980 and 1998, our economy not only had some room for growth, but also maintained solid fiscal health. The governments’ pro-market policies also helped the economy weather the storm.
This time, however, those favorable factors have vanished. Even before the outbreak, our economy suffered from low growth while the government was bent on implementing antibusiness policies one after another. Despite other countries allowing car-sharing services around the globe, the National Assembly even passed a bill aimed at barring Tada, a new van-hailing service in Korea, from taking off. That’s not all. Fiscal deficits are snowballing after a dramatic increase in welfare spending despite a remarkable decrease in tax revenues caused by underperformance of the corporate sector.
We welcome the Moon administration’s injection of emergency funds to help mainstay industries keep their employees and stabilize their business. Over the long haul, however, the government must foster environments for companies to thrive through innovation to cope with crises in the future. The world is already moving in that direction. For instance, China, a leader in the so-called fourth industrial revolution, allowed 1.1 billion people to receive remote medical treatment to tackle the Covid-19 threat.
We need such policies. The outbreak can be turned into an opportunity to ease stifling regulations and rejuvenate our economic vitality. In the 2008 global meltdown, the Lee Myung-bak administration found a breakthrough by lifting as many as 280 regulations. We urge the Moon administration to deregulate. It cannot afford to drag its feet.
JoongAng Ilbo, April 24, Page 30