Unrealistic Targets
Policymakers Had Better Ensure Sustainable Growth
The Ministry of Strategy and Finance said Monday that it will make efforts to achieve 6 percent economic growth and create 350,000 more jobs this year. The ministry reported the targets to President Lee Myung-bak, who took office on Feb. 25. The targets represent Lee's growth-oriented ``747'' formula, under which he promised to increase the annual growth rate to 7 percent, raise per-capita national income to $40,000 and make South Korea the world's seventh-largest economy.
No one wants to see the country suffer from lower growth as the people chose Lee as president on expectations that he would speed up economic recovery. However, not a few people are wondering if the ministry really means to realize the growth target that is seen as too high compared with the 4-5 percent projections by research centers at home and abroad. The ministry's figures are lower than Lee's campaign promises to ensure 7 percent growth and create 600,000 jobs per year.
However, the ministry's targets are much higher than the 4.8 percent projection and creation of 280,000 jobs put forward by its predecessor, the Ministry of Finance and Economy, in January. Why did the ministry make an upward revision in just a two-month period? Economic prospects are increasingly clouded by negative global factors ― a looming U.S. recession and soaring prices of crude oil, raw materials and grain. Rising inflation has become a worldwide phenomenon. Pessimists even warn of stagflation.
The Bank of Korea (BOK) predicted this year's growth at 4.7 percent, while the state-run Korea Development Institute (KDI) forecasts 5 percent growth. The Organization for Economic Cooperation and Development (OECD) anticipated 5.2 percent. Major Korean private institutes predicted 4.5 to 5 percent growth. Some pessimistic economists warned that the Korean economy might slow down to the 3-percent level if it is hit by adverse economic factors.
How can the government boost the economy to see 6 percent growth? The finance ministry said it would promote corporate investment and private spending. It also promised to push for deregulation and offer tax incentives to stimulate investment sentiment. It plans to trim the corporate tax ceiling from the present 25 percent to 22 percent by next year and 20 percent by 2013. But people are not convinced that such measures are enough to meet the growth target.
It is obvious that the ministry has come up with unrealistic figures to help Lee put his growth-oriented policies into action. We believe that it is difficult to comply with the targets and that it will not necessarily have to seek such high growth because it is feared to threaten economic stability. Ex-President Roh Moo-hyun, Lee's predecessor, promised to ratchet up the growth rate to 7 percent. But he failed to keep his promise, as the economy grew by 4-5 percent during his term, while stoking property speculation.
As such, Lee had better give up excessive campaign commitments as soon as possible because obsession with them only leads to overall policy failure. It's time to focus on ensuring sustainable growth and solidifying the nation's potential.