Unity Needed to Overcome Economic Crisis

Korea is bracing for an unprecedented economic crisis at the dawn of 2009.

The worst global financial crisis in a century is spilling over to the real economy, threatening the export-driven Korean economy. Companies will engage in their most sweeping restructuring efforts unseen since the Asian financial crisis more a decade ago.

Amid the deepening economic downturn and tightening job market, people in the middle and low-income brackets are expected to struggle to make ends meet.

The government has forecast economic growth around three percent this year, the worst outlook since a contraction of 6.9 percent in 1998. Many officials are voicing skepticism, however, saying the three-percent growth figure will be hard to attain without a lot of effort.

Think tanks at home and abroad have painted a bleaker picture with forecasts ranging between one and two percent. A slowdown cannot accommodate the more than 500,000 jobseekers who enter the job market every year.

The possibility of mass bankruptcies and layoffs cannot be ruled out if the economy is further pounded by lackluster domestic consumption, low corporate performance and resistance from unions.

To overcome this crisis, all economic players should commit themselves to job creation, the best solution to secure welfare in times of economic difficulty. Individual households, the government, management and labor must join forces in retaining and creating jobs.

The government is advised to push ahead with a Korean version of the New Deal on the one hand, and management and labor should reach a compromise on the other.

Korea must also fight the uphill battle of raising productivity and efficiency of economic players, including businesses, financial institutions and households, through restructuring without job reduction.

What is reassuring in this situation is that since the Asian financial crisis of 1997-98 and the bursting of the credit card bubble in 2003, large and financial companies have sufficiently improved their structures to endure this latest crisis. So swift corporate restructuring preceded by the shutdown of non-viable companies will help normalize the financial system. Individual households should also conduct asset restructuring by reducing loans.

Korea set a global example by recovering from the Asian financial crisis the fastest. If all economic players form a united front in overcoming this year’s expected adversity, the domestic economy will take a giant leap forward. What the nation needs to do so is the right confidence.

bae2150@donga.com