Praising themselves to the sky

Korea’s gross domestic product (GDP) for the third quarter increased 1.9 percent compared to the previous quarter. That’s a rebound from negative growth for two consecutive quarters this year — thanks to increases in export (15.6 percent) and facilities investment (6.7 percent). However, consumption decreased 0.1 percent compared to the second quarter despite the Chuseok holidays.

Deputy Prime Minister for Economic Affairs Hong Nam-ki, who also serves as finance minister, came up with a rosy assessment that the Korean economy has entered a recovery phase. Kim Yong-beom, vice finance minister, also said the economy achieved “very remarkable growth” in the third quarter. But that’s self-praise. The rebound in the third quarter owes much to the base effect from a negative 3.2 percent growth in the second quarter — the worst since the financial crisis in 2007-2008. In fact, our GDP decreased 1.3 percent compared to the same period of last year.

That’s why Park Yang-soo, head of the statistics bureau at the Bank of Korea, said the GDP growth does not mean a V-shaped recovery.

The outlook is uncertain. Though the third-quarter rebound was possible thanks to increased exports, we can hardly expect the same in the fourth quarter due to a surge in Covid-19 cases in the United States and Europe. Some countries are even considering resumptions of lockdowns. Political confusion from a delayed vote count in the U.S. presidential election also bodes ill for the global economy. Domestically, Korea cannot afford more stimuli measures due to the government’s already hefty spending to tackle Covid-19.

Even if the economy returns to pre-Covid-19 levels, you can hardly call it a “recovery.” Korea recorded growth in the two percent range in 2018 and 2019 for the first time since the government began to collect related data in 1954. The fear that the economy will fall into a long-term slump as in Japan has spread as a result of the government’s income-led growth policy, stifling regulations and anticorporate policies.

Hong and Kim made positive assessments about the economy to encourage people to spend. But it’s not time to pat themselves on the back. If they wanted an environment conducive to the revision of the Commerce Act, Fair Trade Act and Labor Act, that’s a serious problem. What’s important is escalating our potential growth rate, which has declined since the launch of the Moon Jae-in administration in 2017. If the government overly regulates the private sector — the engine of our economy and the source of jobs — it cannot raise our potential growth. We hope the government and ruling party return to their senses before it’s too late.