In the run-up to the Dec. 19 presidential election, neither of the two leading candidates, including President-elect Park Geun-hye, showed much interest in economic growth. Both primarily focused on proposals to achieve fairer economic distribution, addressing this pressing demand as the nation becomes ever-more financially polarized.
But things have changed. Now Park, whose late father was former strongman Park Chung-hee who laid a solid foundation for the country’s economic development, cannot but engross herself in growth even to deliver on her campaign pledges for job creation. The road ahead of her, however, seems rough, given the gloomy outlook for the New Year.
In its report on economic policies released Thursday, the Ministry of Strategy and Finance revised its earlier estimate of 4.0 percent growth for 2013, the first year of the Park administration, to 3.0 percent, citing the eurozone debt crisis and America’s fiscal cliff that will continue to dampen global demand.
Most impressive is that the figure is lower than the central bank’s estimate of 3.2 percent and the International Monetary Fund’s projection of 3.6 percent and is compared with the 3.1-3.4 percent range by private think tanks. Considering that the government’s growth projections are usually higher than those by think tanks, this clearly shows the stark economic realities the President-elect should tackle as soon as she takes office in late February
According to the report, the Korean economy will continue to grapple with low growth in the first half of 2013 but will improve slightly in the latter half thanks to the gradual global economic recovery. But downside risks will persist, depending on the speed at which the world economy recovers.
Exports and imports are forecast to expand 4.3 percent and 4.6 percent, respectively, a major departure from this year’s negative gains. The current account surplus will shrink from this year’s estimate of $42 billion to $30 billion and consumer prices are expected to rise 2.7 percent next year, faster than this year’s 2.2 percent but within the Bank of Korea’s target range of between 2.5 and 3.5 percent.
The biggest problem is that the economy is lapsing into a prolonged low-growth path and this will be certifiably one of the greatest challenges facing Park.
There is a general consensus that it will be inevitable for the new administration to pump-prime the sagging economy through active fiscal policies but Park and her economic aides need to be on full alert over possible adverse effects such as soaring inflation and worsening fiscal soundness.
What is needed most are durable prescriptions for the long term and structural problems of our economy ― revitalizing domestic demand by innovating the backward service industry.
All previous administrations have attempted to reform our services sector so far but none have succeeded because of vested interests. The new administration must keep in mind the axiom that ``actions speak louder than words.’’