The Ministry of Finance and Economy officially declares ‘bottoming out’

Concerning the economic cycle, the administration reported on November 2, “The domestic economy has bottomed out in the third quarter (July-September) of this year and is now on its way to recovery.”

On the same day, the Ministry of Finance and Economy analyzed, “According to the ‘Industrial Activities in October 2003,’ although investments and consumptions are sluggish, many business indices and production-related indices, such as production and inventory, have been in good condition for several consecutive months.”

In relation to this, the Ministry of Finance and Economy claimed that the economy has bottomed out, saying, “The production is increasing and the Leading Index and Coincident Index rose for five and three consecutive months, respectively. Considering that the Leading Index precedes the real cycle for three – five months, the domestic economy has already bottomed out.”

Although Kim Jin-pyo, Deputy Prime Minister and Minister of Finance and Economy, and Park Seung, Governor of Bank of Korea, have referred to the recovery in their lectures several times, this is the first time the administration has declared the “bottoming out” officially.

However, some people point out that the optimistic views of the government about the recovery are “too hasty.”

Hong Sun-yeong, chief economist of Samsung Economic Research Institute said, “Due to the growing exports in several industries, including the semiconductor and the cell phone industries, the indices can show the recovery numerically. The consumption and domestic demand however, must first revive in order for people to solidly feel the recovery; it will take substantial amount of time until then.”

Considering many uncertain factors surrounding the Korean economy, some economic professionals predict it is possible that the economy will decline again and stay in a continuous slump for a long while, depending on the government’s reaction from now on.

Kwang-Hyun Kim kkh@donga.com