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Is Forced Economy Recovery a Thing of the Past?

Posted November. 03, 2009 08:27,   


Uncertainty is rising in the global economy with the recognition that economic stimulus meant to overcome recession no longer works.

Moving out of an economic crisis requires private sector recovery but this is not picking up fast as expected. U.S. stocks dropped 2.5 percent due to jitters last weekend, and Korea’s benchmark index plummeted for five trading days to close at 1,559.09 yesterday.

Governments used unprecedented economic stimulus packages early this year to save the world economy from disaster. As the effects of the measures are phased out, real fundamentals are being unveiled.

Skeptics say the surprising rebound in economic growth in countries such as Korea and the U.S. is a “superficial recovery” heavily dependent on the stimulus packages.

Economists warn that Korea could directly suffer from the lessened effects of economic stimulus packages. U.S. sales of Hyundai and Kia Motor in September dropped 47 percent from August as the Cash for Clunkers program ended.

“The private sector, which countries expected to rebound automatically with economic stimulus packages, apparently hasn’t revived,” said Kim Hak-joo, executive director at Samsung Securities. “As countries can no longer use stimulus packages due to the financial burden, the global economy is now forced to cope with poverty.”

jarrett@donga.com crystal@donga.com