(EDITORIAL from Korea Times on April 21)
End of long slump?
-Despite signs of recovery, optimism is premature-
Major economic think tanks and agencies are rushing to revise upward their growth forecasts for the Korean economy.
The International Monetary Fund raised its growth outlook for this year to 2.7 percent this week from its earlier estimate of 2.6 percent. The Korea Development Institute (KDI) also predicted that the economy would grow 2.6 percent this year, up from its previous projection last December of 2.4 percent. Last week, the Bank of Korea raised its growth forecast from 2.5 percent to 2.6 percent.
Such improved growth forecasts for Korea are attributed largely to brisk exports and increased investment amid signs of a global economic recovery. Korean exports have been on the rise for five months in a row, with the March figure hitting a 27-month high of $48.9 billion. Increased shipments of such flagship items as semiconductors, displays and petrochemicals are especially welcome.
But it's too early to be optimistic. Asia's fourth-largest economy may have bottomed out but it is far from a full-blown recovery. Estimated growth rates have been revised upward, but all of them still fall within the low growth area below 3 percent.
A bigger problem is that consumption, one of the twin pillars of economic growth, is showing no signs of a turnaround yet. The severity of depressed consumption is evidenced from the KDI's recent cut in consumption growth from 2.3 percent to 2.2 percent.
Weak consumption may be natural, given that household debt has already become a ticking time bomb and that "growth without employment" has become the norm. A recent survey of 258 companies with 100 or more employees found that only half of them have hired new workers or have plans to do so.
Despite faint hopes for economic recovery, there remain downside risks. On top of geopolitical risks arising from North Korea's nuclear and missile threats, trade protectionism pursued by U.S. President Donald Trump can restrict recovery. Korea is already reeling from China's economic retaliation against Seoul's decision to host an American missile defense battery.
All of this explains why our economic players must not fluctuate between hope and fear merely with growth trends. They ought to face up to the economic reality with a longer-term perspective.
What is most troubling is that Korea's real disposable income has been almost at a standstill over the past 10 years. Given that the public needs more money to spend to revive consumption, top policy priority should be placed on enabling households to increase their disposable income.
After all, the point is to let companies hire more workers through stepped-up structural reform of labor and other key sectors. Much to our regret, however, none of the leading presidential contenders seem to be up to the task. Rather, most of them have hampered efforts to spur structural reforms at the National Assembly.