The gray rhino before your eyes
AN HYO-SEONGThe author is a finance news team reporter at the JoongAng Ilbo.
A sense of crisis is deepening in the economy. There are concerns of stagflation. On April 12, Deputy Prime Minister for Economic Affairs Hong Nam-ki said that this year’s economic growth rate would be lower than the goal of 3.1 percent and the inflation rate would be higher than the expected 2.2 percent. In the aftermath of Russia’s invasion of Ukraine, prices of food and energy are soaring, and the United States has tightened austerity measures. The consumer price index of the U.S. rose by 8.5 percent from the previous year, the highest since 8.9 percent in December 1981.
Warnings that Korea could face hardship due to the austerity measures in the United States started to be made by government officials since the end of last year. Deputy Prime Minister Hong underscored the need to pre-emptively remove risk factors like the gray rhino — predictable yet overlooked risk factors.
Hong mentioned household debt, the U.S. policy shift to austerity, inflation as a result of oil and raw material price rise, and delay in resolving global supply chain disruption. Aside from Russia’s invasion of Ukraine, they are exactly the same as the elements fueling the recent debate over Korea’s possible economic crisis.
The problem is that few actions have been taken as the gray rhino approaches aside from tightening household debt. Despite the concerns about inflation, the release of money continued with the supplementary budget, and the impact of supply chain disruptions such as the urea water shortage hit hard because of delayed responses.
As the discord between the outgoing and incoming powers delayed the appointment of the Bank of Korea Governor, the Monetary Policy Board was held without the governor for the first time. The ruling Democratic Party (DP) is pushing for depriving investigation authority from the prosecution. Justice Party spokesperson Jang Tae-su said, “I am worried that the National Assembly would turn into an ‘animal assembly’ because of extreme confrontation when it should take care of people’s lives and unusual inflation at the time of transition.”
It is best not to run toward an angry rhino. If the rhino is already charging, there is only one way. Michele Wucker, president of the World Policy Institute who first used the concept of gray rhino, said we must not stay still. The transition committee recently declared a war against inflation. I only hope for the new administration’s swift and correct response.
with the Korea JoongAng Daily
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