[Editorial] Economic Growth Impeded by Beef Disputes

Economic conditions have worsened while the government and the public have stuck to the beef issue. The Bank of Korea announced yesterday that Korea’s Consumer Sentiment Index, which shows economic conditions perceived by the people, reached its eight-year low of 86 in June. A CSI below the benchmark 100 means that lots of consumers believe economic conditions have aggravated. Korea’s CSI fell an eye-popping 19 points from three months ago. On the other hand, consumer prices are expected to grow by more than 5 percent from a year ago.

Worse, economic think tanks at home and abroad are cutting their economic forecast for Korea. Samsung Economic Research Institute and LG Economic Research Institute predicted that Korea’s economy would grow a mere 3.8 percent and 4.0 percent, respectively, in the second half of this year. Similarly, the International Monetary Fund forecasted that Korea’s economy would grow 3.1 percent in the second half of this year, 3.6 percent in the third quarter and 2.6 percent in the fourth quarter. Even if Korea’s economy could grow by more than 5 percent in the first half, its gross national income would fall due to aggravating economic conditions such as skyrocketing international oil prices. Making matters worse, a series of economic think tanks have announced that Korea’s economic growth rate for 2008 would be much lower than expected. For its part, the Korea Development Institute announced that the middle-income bracket has sharply decreased while the low-income level has worryingly increased over the past decade.

After growth engines weakened under the leadership of Roh Moo-hyun, Koreans voted for Lee Myung-bak, who promised to revive the economy. But nothing has been changed. It is true surging international oil prices and uncertainties in the international financial market have put a burden on the Korean economy. Still, the government is also responsible for the recent difficulties since it has pursued an unreasonable growth policy and let the foreign exchange rate remain high, creating stagflation. And, as people’s confidence in the government has deteriorated, the government’s force to drive reform has weakened. But that’s not the end of the story. Those who are also responsible for the recent difficulties include opposition parties who have denied attending the National Assembly and leftists who have repeatedly tried to deal a blow to the government. The general public can also be held somewhat accountable since they have exaggerated the beef issue and prevented the government from focusing on economic issues.

The government will emphasize economic stabilization in its announcement of economic policies for the second half of the year, which will be made next week. The government seems to understand that it is urgent to clear the people of worries over economic crisis. However, it will not be easy for this government, which promised to revive the economy, to satisfy the people with only 3 to 4 percent of economic growth in the second half. Regardless of the government’s measure to strike a balance between growth and stabilization, the government, politicians and people should break the deadlock resulting from beef.