It’s the economy...

Kim Dong-ho
The author is an editorial writer at the JoongAng Ilbo.

The South Korean economy after surviving Asian liquidity crisis in 1997 and global financial crisis in 2008 faces another turmoil from a global economic slump. Hopefully, the county will get through it thanks to its past experiences and the fundamentals of the global No. 10 economy. But whether it ends up unscathed cannot be certain due to the menacing headwinds. The trade deficit has been ballooning from strong inflation and a strong dollar. The rapid rise in interest rates has started to shake the prices of apartments in Gangnam, Seoul. The neo-Cold War environment with America and West-led democratic states pitted against state-controlled China and Russia also helps deepen global uncertainties.

Jitters from economic insecurity could spread. Hopes for stability in the economy after an upset from the experimental income-led growth policy under the Moon Jae-in administration could be dashed. Common lives have become unsettled. Those who purchased homes beyond their means through loans will be devastated by the crash in housing prices and a jump in interest rates.

Household debt of 1,859 trillion won ($1.4 trillion) is a ticking bomb. The debt is 104 percent of the GDP, the highest ratio in the world. Borrowers are tightening their belts. But it is not easy to respond to a fast buildup in interest costs, when coupled with waning hopes for gains from the appreciation in home values. Pent-up demand for durable goods like cars, electronic appliances and furniture is fizzling out, too. Consumption could weaken further. Due to low savings rate, the country’s purchasing power is not high. Consumption, output and investment could simultaneously turn sluggish amid fiscal and monetary tightening. The bottom in the stock market cannot be fathomed. Tantrums could continue if the U.S. Federal Reserve continues with gigantic steps, or rate hikes of more than 50 basis points.

The political toll could be heavy. The new government of President Yoon Suk-yeol sails into a foggy and perilous sea. The government had ambitious plans to carry out deregulation across the board and address difficult issues like normalizing the relationship with Japan, as there is no major election before the 2024 parliamentary elections. But it could lose impetus against economic woes. Inflation can be the most unsettling political factor among economic issues. Without stable prices, economic growth and political security cannot be assured as already proven in world history.

Rep. Kim Ki-hyun, center, a former floor leader of the People Power Party, makes a speech Wednesday at a meeting in the National Assembly to promote innovation to tackle economic challenges Korea faces. [KIM SANG-SEON]

George W. Bush’s approval rating had hit 89 percent after his Gulf War in 1991. His reelection in 1992 was not in question. The media likened the eight Democrat candidates against the sitting president to midgets versus the giant. One of them was Bill Clinton. In the match between David and Goliath, the giant fell at the slogan of “It’s the economy, stupid.”

In America, sitting presidents extended their term into the second since Franklin D. Roosevelt unless the economy receded. During George H.W. Bush’s reign from 1989 to 1993, the economy had been poor. In his third year, the economy contracted.

Presidents Jimmy Carter (1977-1981) and Gerald Ford (1974-1977) also lost a reelection due to economic troubles. A regime falls easily in developing countries. The president had to resign in Sri Lanka.

Korea is no different. Leaders gain support if people’s livelihoods are stable — and is shunned when they are not. The liberal Democratic Party lost its ruling power to the conservative People Power Party due to the economic toll from its income-led growth policy and other failed economic experiments under president Moon Jae-in over the past five years. The clock is ticking towards the 2024 legislative elections and 2027 presidential election. Yoon’s government must do its upmost to stabilize the economy, as it always overrules politics.