[Editorial] Pres. Lee No Better in Economic Forecasts

President Lee Myung-bak told a Cabinet meeting yesterday, “Our economic conditions are completely different from those at the time of financial crisis back in 1997. The government is meticulously coming up with countermeasures.” As his statement suggests, what has directly caused the country’s latest economic setback is U.S. financial problems, not his government’s policy failures or lack of leadership. When the 1997 crisis sent shockwaves throughout the Korean economy, the International Monetary Fund’s bailout helped guide the direction in which the country should go. That means Korea had concrete measures to get out of the crisis. But the crisis now is different. No one can guarantee when the difficulties will end. The government’s inability to make accurate economic forecasts is a rising source of worry to Koreans.

In October last year, the Finance and Economy Ministry (now the Strategy and Finance Ministry) released a report saying, “The U.S. subprime mortgage crisis is unlikely to cause a crisis in the global financial market system and negatively affect the real economy. Given the weakening influence of the U.S. economy on Korea and Asia’s decoupling from the U.S. economy, the subprime crisis will not make a big impact on the Korean economy.” All of the ministry’s analyses and predictions have been proven wrong.

The Lee administration has fared no better than its predecessor. Economists even say President Lee is not an “economy president” and no better than Roh Moo-hyun. President Lee should not think he is absolved of blame since he and his economic aides have announced a series of groundless rosy prospects.

In September, when the U.S. financial crisis began affecting the global economy, President Lee said, “The Korean economy will not see a serious impact from U.S. financial difficulties.” With the rumor that Korea would face a September crisis proven wrong, Strategy and Finance Minister Kang Man-soo said, “Our foreign exchange rate and market are much more stable than those of other nations.” He changed his words Monday by saying, “The aftermath of the financial crisis is expected to spread to the real economy.” Worse, the government has lowered its growth forecast for this year from six percent made in March to 4.7 percent made in July and further to around four percent made last week. If the government cannot make accurate economic forecasts, it should not brag about its economic policy. An erroneous forecast is worse than no forecast.