Policymakers should face up to reality to avoid downside risks
Concerns about the Korean economy are mounting more than ever. The Korea Development Institute (KDI), in its recent report on economic trends, said, "The Korean economy is gradually slumping, as demand is contracting at home and abroad." It is noteworthy that the state-run think tank has changed its diagnosis of the nation's economy from "slowdown" to "slump."
Already, the economy has been sending more than a few danger signals. Industrial output and facility investment in February dropped 1.9 percent and 10.4 percent, respectively, from the previous month. Exports in March dwindled 8.2 percent from the same month of 2018.
The number of people who applied for individual and free workouts to the Credit Counseling and Recovery Service totaled 29,091 in the first quarter, up 2,552 from the fourth quarter of last year. That means an increasing number of people have become unable to repay principals and interest.
The shaky economic situation is due to the combination of structural problems and the external environment. Korea's flagship industries are faltering, and its high-tech sector is lagging behind those of advanced nations. Excessive household debt is suppressing consumption.
Korea's ratio of household debt to gross domestic product was 96.9 percent last year, the highest among the 34 advanced and emerging economies surveyed by the International Institute of Finance. Major economic powers, such as the U.S., China and European Union, are also slowing, dealing additional blows to the Korean economy that relies heavily on exports.
Some pessimists are presenting dismal scenarios of systemic failure, in which business setbacks, sluggish corporate performance and income decline combine to result in a financial crisis. That, of course, remains the minority view, which may not become a reality. Nevertheless, this is the right time for policymakers to look straight into economic conditions and make extraordinary efforts.
The government has to work out fundamental, not ostensible, remedies and politicians ought to refrain from partisan bickering and pool their wisdom for an economic breakthrough. Businesses for their part need to more proactively find ways to avoid downside risks.
Concerns about the Korean economy are mounting more than ever. The Korea Development Institute (KDI), in its recent report on economic trends, said, "The Korean economy is gradually slumping, as demand is contracting at home and abroad." It is noteworthy that the state-run think tank has changed its diagnosis of the nation's economy from "slowdown" to "slump."
Already, the economy has been sending more than a few danger signals. Industrial output and facility investment in February dropped 1.9 percent and 10.4 percent, respectively, from the previous month. Exports in March dwindled 8.2 percent from the same month of 2018.
The number of people who applied for individual and free workouts to the Credit Counseling and Recovery Service totaled 29,091 in the first quarter, up 2,552 from the fourth quarter of last year. That means an increasing number of people have become unable to repay principals and interest.
The shaky economic situation is due to the combination of structural problems and the external environment. Korea's flagship industries are faltering, and its high-tech sector is lagging behind those of advanced nations. Excessive household debt is suppressing consumption.
Korea's ratio of household debt to gross domestic product was 96.9 percent last year, the highest among the 34 advanced and emerging economies surveyed by the International Institute of Finance. Major economic powers, such as the U.S., China and European Union, are also slowing, dealing additional blows to the Korean economy that relies heavily on exports.
Some pessimists are presenting dismal scenarios of systemic failure, in which business setbacks, sluggish corporate performance and income decline combine to result in a financial crisis. That, of course, remains the minority view, which may not become a reality. Nevertheless, this is the right time for policymakers to look straight into economic conditions and make extraordinary efforts.
The government has to work out fundamental, not ostensible, remedies and politicians ought to refrain from partisan bickering and pool their wisdom for an economic breakthrough. Businesses for their part need to more proactively find ways to avoid downside risks.
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