False Economic Outlooks

As the government’s outlook on the timeline of economic recovery goes astray for yet another time, the people’s confidence in the government’s economic policy is failing.

Last year, the government expected the economy to recover by the end of this year but recently adjusted the expected recovery time to the second half of next year. Experts analyze that to deny the serious economic recession they are giving an optimistic view, and as a result the government is continuously reporting false outlooks.

On October 8, an anonymous high-ranking officer of the Ministry of Finance and Economy confessed, “We will endure the first half of next year by holding to an expansive financial policy, but we are anxious about next year’s second half,” and added, “We are agonizing over how to manage next year’s economy.”

The officer acknowledged that the optimistic view the government has been announcing to the public is far from the economic truth.

Actually, at the beginning of this year, Lee Heon-jae, the deputy prime minister and also the minister of Finance and Economy, and Park Seung, the director general of the Bank of Korea, maintained that “domestic demand will recover this second quarter (April to June),” but the stagnation of domestic demand is deepening.

As a result, on October 6, Prime Minister Lee Hae-chan replied, “The economy will start recovering by the second half of next year,” and delayed the time of economic recovery.

However, it was indicated that even this outlook is overly optimistic because recently, international financial organizations such as Asian Development Bank (ADB) and domestic and foreign economic research institutes have severely decreased the anticipated economic growth rate from five percent to three to four percent.

Oh Mun-seok, a managing director of LG Economic Research Institute, said, “The effects of the government policy for credit delinquents is insignificant, and it will be difficult for the economy to recover enough for them to consume,” and added, “Without the increase of the supply of housing and the demand for housing, it is difficult to expect a recovery for the construction industry.”

An anonymous researcher of a private economic research institute said, “It is not that I do not understand the government’s attempt to give the people hope, but it is better to announce a policy the people can agree with and to gain the people’s confidence than to give false outlooks.”

Chi-Young Shin higgledy@donga.com