The 2.7 percent first-quarter GDP growth announced last week by the Bank of Korea is indeed disappointing. It is the result of the fact domestic consumption did not come back as expected. It is only natural that there is pessimism about whether there will be even 4 percent growth, never-mind the government's goal of 5 percent. The two pillars of domestic spending, private consumption and investment, are psychology very influenced by confidence in policy and political stability. In that sense, the government is in no small way responsible for fostering the uncertainties with a lack of ability in mediating the discord about various issues. The government might want to protest that assertion, but when so many are suggesting there have been such problems the right thing to do is to take a look at yourself and where the problems might be.
The fall in the growth rate is also reason for worry because of the reaction it will cause. The government said it will achieve 5 percent growth by doing everything possible in the way of policy. It has yet to be seen exactly how it is going to go about making sure that happens, but it must guard against short-tern stimulation packages as it so eager to achieve its goal. Already there are people blaming slow domestic spending on the government's real estate policy and regulation, and there are increasing calls for the government to stimulate the economy by spending on construction and relaxing regulation in the greater capital region. Growth is important, but relying on a bubble economy or upsetting the country's plan for the balanced development would be to kill good intentions with a harmful remedy.
More importantly the government needs to produce a plan for strengthening the country's basic economic strength, in order to be better prepared for the uncertain global economic future. If it really is going to use short-term stimulation packages it must do so within that framework. Raw materials are sky high, economic recovery in advanced nations is coming slowly, and real estate is a bubble market, so global economic conditions are full of uncertainties. The International Monetary Fund (IMF) and the famous American economist Paul Krugman have both even warned that a global economic crisis could be in the not too distant future. The government needs to remember that using bubbles in the economy or folk remedies for the sake of a recovery would lead to a lot of difficulties were there to be a time of global economic adjustment.
The Hankyoreh, 22 May 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Things to Watch Carefully as Growth Falls |
