[Editorial]The Worst Economic Growth Since the Foreign Exchange Crisis

The GDP increased 2.7 percent from last year, recording the worst growth rate since the foreign exchange crisis. This is lower than the government`s 3.6 percent projection after the downward adjustment, demonstrating how the government`s calculations are increasingly off. The people are losing confidence in the government`s forecasts to such an extent that one wonders whether it is the government`s lack of foresight or its attempt to paint a rosy picture for the people.

It is understandable that our economy cannot be the only healthy one when the U.S., Taiwan, and Singapore economies are suffering. When, however, the government announces that the situation will only get more difficult in the 3rd and 4th periods after repeatedly insisting that the economy will get better, we really have reasons to worry.

Especially worrisome in the Korea Bank announcement is the content rather than the growth rate. The contributing ration of exports to the economic growth rate has fallen from 119.8 percent to 23.5 percent, whereas the contributing ration from consumer spending has risen from 12.7 percent to 54.3 percent. Of course, consumer spending itself is not a bad thing, but the rapid ebbing away of exports and facility investments, which traditionally led our economy, gives us reasons for concern.

The main reason for decline in exports is, of course, the reduction in semiconductor sales after the collapse of the global semiconductor market. Although experts differ in degree, the majority expresses the view that the semiconductor market is not likely to revive within this year. This leaves little choice in terms of economic policy except to stimulate investments in equipment and facilities.

The problem is that facility investment is rapidly decreasing despite the administration`s continued reduction of interest rates and investments in public funds. Verbal promises of monitoring corporations without actually doing so, political strife between parties, the divisions in national opinion all constitute factors that discourage businesses from making facility investments. The first thing to do at this point in time is to eliminate any negative effects on the economy that stem from the political situation. At a time when the economy is worse off than the period before the last crisis, the administration and majority party should stop focusing on nonessential matters, and concentrate on restoring confidence in the market and making each economic policy effective. It must model this for the nation and the people.