ed Tackling low growth

Top priority must be put on expanding growth potential

Five years ago, Lee Myung-bak was elected president thanks partly to his tantalizing “747 plan’’ of achieving 7 percent economic growth and $40,000 in per capita GDP and making Korea the world’s seventh largest economy.

By contrast, his successor Park Geun-hye didn’t even present clear macroeconomic targets in her election platform. This was because the most-talked-about topic of the presidential election had changed from growth to economic justice over five years. Given the growing need to tame large business conglomerates and the ever widening income polarization, the emergence of “economic democracy” as the keywords of the election is understandable.

Then, will the success of the Park administration be guaranteed if the President-elect just devotes herself to spreading the gospel of ``economic democratization’’ and spending astronomical amounts of money to make good on her welfare pledges? Chances are this won’t be the case. Rather, the success of her presidency will depend largely on her economic record, especially in the first year of her five-year tenure. But the future is not so bright.

The Bank of Korea said Thursday that the Korean economy grew 2 percent last year, its slowest pace in three years, as the global downturn dampened both exports and domestic demand. The figure fell short of the central bank’s revised projection of 2.4 percent and was only half of the country’s potential growth rate estimated at 4 percent.

Exports, which account for nearly 50 percent of economic growth, rose 3.7 percent in 2012, a sharp slowdown compared with the 9.5 percent gain in 2011. Investment in plants and equipment contracted 1.8 percent last year amid the protracted global economic recovery and sluggish domestic demand.

It’s fortunate that the Korean economy is forecast to improve this year, albeit moderately, buoyed by a gradual upturn in the U.S. and China and the new administration’s possible stimulus package. But the strengthening local currency is a lurking challenge as Korean products are losing their price competitiveness abroad.

True, the protracted economic slowdown may put the incoming president in a hopeless quandary even before she sets in motion her economic revitalization plan. Given that growth is the backbone of job creation and welfare, the continuing low growth runs the risk of denting her entire vision for state affairs.

This concern is all the more so, considering that a drop of 1 percentage point in growth results in 2 trillion won in lost tax revenue. What matters most is that no plausible solution is in sight although Park proposed creating a new supersize ministry and reviving the deputy prime minister for economic affairs.

Now Park needs to guide the nation back to basics. Hopefully, all efforts will be made to expand our growth potential from the long-term perspective and encourage businesses to transform themselves from fast followers to first movers in the firm belief that jobs are created by companies.