Korea’s economy shrank by one percent last year for the first time in 22 years, which is the lowest growth rate since the 1997 Asian financial crisis. Per capita income fell to the 31,000 dollars range from 32,115 dollars. But a Cheong Wa Dae spokesperson said Korea’s growth rate was one of the highest compared to 10 advanced countries as it only fell three percentage points from 2.0 percent growth of 2019.
The government highlighted that Korea’s growth rate dropped less than other advanced countries that recorded a fall by three to 10 percentage points year-on-year and even China’s growth declined by 3.7 percentage points to 2.3 percent last year from 6 percent the previous year. The South Korean government and the ruling party seem to be proud of their work which supposedly cut the decline by one percent, one percentage point added by the government from a drop of 2.0 percentage points in the private sector.
But Korea’s comparatively smaller drop in the growth was thanks to the private sector that was ready and acted fast to minimize the damage. The untact trend induced by COVID-19 has rapidly increased exports of home appliances such as high-resolution televisions, and biopharmaceutical companies provided COVID-19 diagnosis kits to all over the world. Even though small business owners in face-to-face businesses took the brunt of the pandemic, chipmakers increased their investment on facilities by 6.8 percent, turning the crisis into an opportunity. But the increased fiscal spending should be replenished again by reducing government spending or even increasing taxes.
In fact, the Korean economy was mired in the swamp of low growth even before the pandemic. The growth of 2.0 percent in 2019 was already all-time low except the 2008 financial crisis, 1997 Asian financial crisis and the second oil shock. It had a smaller room to move down in the first place as small business owners, export companies and the like were already having difficulties due to the spike in the minimum wage and trade disputes between South Korea and Japan. It is hard to say that Korea’s growth prospect for this year is 3.1 percent, which is lower than the average of advanced countries (4.3 percent) not to mention China (8.1 percent) and India (11.5 percent), because of the base effect.
It is the first time since the national foundation that Korean society experiences low growth below two percent for two consecutive years. The only way to recover economic fundamentals is to revitalize private consumption and investment. It would not be possible if the government sticks to its current stance, legislating anti-market and anti-business laws every day.