Elated at 4 percent growthThe Korean economy grew 4 percent last year at the strongest pace in 11 years. On Facebook, Deputy Prime Minister for Economic Affairs Hong Nam-ki touted a “strong economy in the face of crisis through the fastest recovery among G20 economies.” The Bank of Korea projected Korea’s per capita income to reach $35,000, growing 10 percent from the previous year.
The average economic growth and gain in the final year of a five-year presidential term is often cited to compare and measure the performance in economic management of each administration. Hong gloated at the final report card “as a meaningful achievement.”
But the economic results require cool-headed evaluation. Last year’s growth was noticeable thanks to an economic contraction in 2020 — the first year of the pandemic — and robust exports on top of the supersized budgetary spending amounting to near 50 trillion won ($42 billion). The aggressive spending will cause national liabilities of over 1,000 trillion won this year.
The economy has too many weaknesses. According to the Federation of Korean Industries, Korea lost 180,000 jobs in the manufacturing sector from 2015 to 2019. During the same period, manufacturing jobs increased in the United States, Japan and Germany. Overseas jobs in Korean business entities added 430,000. Most of the job exodus took place during the Moon Jae-in government.
Latest job data are no better. The number of people giving up looking for jobs hit the largest figure last year since such data started being collected from 2014. As many as 630,000 people have stopped looking for jobs.
Economic prospects for this year are not bright either. The International Monetary Fund cut its estimate for Korea’s growth for this year by 0.3 percentage points to 3.0 percent while raising Japan’s by 0.1 percentage point to 3.3 percent. The Korean economy will be running slower than Japan for the first time since the Asian financial crisis in 1998.
While the finance minister celebrated last year’s economic performance, Korea’s main stock markets crashed nearly 3 percent. Institutional investors fretful of the U.S. monetary tightening and a slowdown in China are taking their money out of Korean markets for safer assets. While stocks and cryptocurrencies are crumbling down, housing prices are sinking. Leveraged investors cannot sleep at night. Yet the top economic policymaker is oblivious.