Gov't Persists in Failed Economic Policy

  • By Kim Sung-mo, Kim Kyeong-pil

    May 09, 2019 12:29

    Friday marks President Moon Jae-in's second anniversary in office, and the government in a meeting on Wednesday celebrated the event with a glowing review of its economic policies despite some of the worst indicators in recent history. 

    Finance Minister Hong Nam-ki, presiding over the meeting, said, "In spite of tough conditions, we've worked hard to bring about an economic paradigm shift, and these efforts have led to the stabilization of the macroeconomy and creation of innovative spirit."

    Hong admitted that it seems that those results are not yet felt by the public at large "as risks of further economic decline exist while people continue to face difficulties."

    But attendants cited exports surpassing the US$600 billion mark last year, which have since slumped, and private consumption rising to what it said was the highest level since 2011. they also cited stable inflation, and two months of job growth.

    Yet the main reason export figures rose on paper last year was that one or two top conglomerates rode a semiconductor and petrochemical boom that has now deflated. Overall exports have fallen for the past five months, while Korea's current account surplus in the first quarter of this year dropped to the lowest since the second quarter of 2012.

    Private consumption grew only 0.1 percent on-quarter in the first three months of this year, the lowest in three years.

    The government's claim that Korea's economic growth rate is sound compared to most advanced economies is also inaccurate. Korea ranked 18th among 36 OECD member nations in terms of economic growth last year, the lowest since the 1998 Asian financial crisis.

    Overall inflation did fall from 1.9 percent in 2017 to 1.5 percent last year. But that again is an inaccurate reflection of price increases, because only housing rent and some other areas dropped, while the price of a basket of common comestibles shot up stratospherically. The price of rice soared 27.1 percent, of potatoes 21.4 percent, and of chilli powder 33 percent.

    On paper, employment rose by 200,000 jobs for two consecutive months this year, but that was due to over 300,000 temporary menial jobs being created for the elderly and paid for with taxpayers' money, while masses of jobs in manufacturing and for people in their 40s and 50s disappeared.

    The finance minister ignored a raft of more recent negative economic indicators. Korea's economy shrank 0.3 percent in the first quarter, the worst performance in a decade, while facility investment plunged 10.8 percent, the worst in 21 years.

    Kim Tae-gi at Dankook University said, "In 1997, just before the Asian financial crisis, then-Finance Minister Kang Kyong-shik claimed that Korea's economic fundamentals were solid, and no sooner had he said it than the Asian financial crisis erupted. The government's behavior now reminds me of that."

    And Sung Tae-yoon at Yonsei University said, "All experts agree that economic conditions are extremely bad. The government needs to come up with policies based on a realistic assessment of actual conditions."  

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