Government Repeats Saying “Economy Is Improving”

Despite the recent signs of a lagging economy induced by high oil prices and the China shock, the government is keeping its optimistic view that those factors will not affect the national economy and is remaining passive in providing solutions.

The government keeps promoting the rosy view that “the economy will get better soon” even though there is no sign that family spending or investment is reviving.

With the governmental misconception and absolutely no solution, a sense of insecurity is growing among investors.

The government discussed the recent economic trends and how the Chinese retrenchment will affect the Korean economy in an economy ministry meeting on May 7.

The Ministry of Finance and Economy reported in the meeting that exports are on the increase, that consumption has recovered somewhat in April, and that domestic machinery orders and machinery imports, which are two indicators for growing investment, have shown indications to increase.

Along with these, they added, the number of the employed has continuously increased for five months and that the consumer price is becoming more stable.

Following the economy ministry was the Ministry of Commerce, Industrial, and Energy’s explanation of “the influence of Chinese retrenchment on national industries and exports,” saying that “exports to China can be somewhat dulled because of the Chinese economy being stabilized, but the overall export market will stay in the black.”

A Commerce Ministry official said, regarding the influence of a slowdown in the Chinese economy on different industries such as steel, petrochemicals, automobiles, shipbuilding, electronics, and semiconductors, that “some consumer items will experience a decrease, but other industries will not be affected.”

The government revealed its lack of policy alternatives for upcoming issues by repeating the same vague policies for the China shock, such as strengthening the monitoring system for the Chinese policies, diversifying exports and enhancing negotiation skills toward China, and strengthening preliminary education for companies investing in China.

Prior to this, officials from the finance ministry, the Bank of Korea, and the Financial Supervisory Service held a financial policy coordination meeting and concluded, “Even though stock prices fell in a short period, the situation is not worrisome since the interest rate and the exchange rate are stable.”

However, there are voices claiming that the government’s response is too passive. With the ever-increasing oil price in the world market, there is an underlying uneasiness in the financial marketplace.

Yonsei University Professor Lee Doo-won pointed out, “There are too many unpredictable factors in the economy now. With all those domestic and foreign factors set up against us, government officials are too optimistic and are not able to produce plausible policies.”

Chi-Young Shin higgledy@donga.com