[Editorial] Drifting Policies and a Worsening Economy

Han Duck-soo, the deputy prime minister and the minister of Finance and Economy, was at an Uri Party workshop on May 30 and expressed his concern about the current economy by saying, “The Korean economy will face a long-term depression like Japan if we do not bring about any radical improvement in our economic system.” At an economic forum, he also noted, “It will be difficult for Korea to see five percent economic growth for this year.”

Han’s comment was not different from confessing that the government has been dishonest about the current economic condition, and that its capability of forecasting the economy is far below that of private institutions or overseas experts.

Without quoting Han’s remark, similar worries over current economic conditions have been raised many times and are not surprising anymore. The government has been busy covering worries. President Roh Moo-hyun has even been suggesting the possibility of a complete economic recovery. But looking at the economic indicators announced yesterday, we can easily see how easygoing the government has been in dealing with the economy.

According to National Statistical Office, investment and wholesale and retail sales for April were falling. Export growth rate stayed at 7.7 percent and exports to the United States declined by 2.2 percent. Economic indicators showed a short rise from January to March, and fell by 0.1 percent point in April. The forecast for small- and medium-sized companies was a decrease over a four-month span of time.

Despite the difficult economic situation, the ruling party has been repeatedly wrong in presenting economic policies. The government responded by saying, “It is too early to say,” to the Uri Party’s policy requests, such as the removal of registration taxes and the reduction of real estate transaction tax rates.

When the Ministry of Finance and Economy and Ministry of Commerce, Industry and Energy urged the government to allow domestic conglomerates to expand their plants in metropolitan areas in Gyeonggi province, the Office of Prime Minister and the Ministry of Construction and Transportation were opposed to the idea while raising an issue of balanced regional development

The already enacted policies have contracted investment and consumption, as opposed to their original objectives. The crackdown on real estate taxation and the expansion of the development allotment system have contracted construction-related investments, and price hikes in such items as oil, tobacco, and public facilities have shrunk consumption. The interest rate policy has been drifting between a crackdown on real estate speculation and economic stimulation, and so has the exchange rate policy between export and inflation.

To maintain sustainable economic growth, interior growth momentum such as private consumption and investment is important. The ruling party should pour its energy into supporting the economic activities of private sector. As Minister Han noted, now is a very important time for the economy to head in the right direction.