ed Unnecessary argument

The government and the central bank are in a fresh war of nerves over the state of the economy in the wake of a report that showed the Korean economy grew more than expected in the first quarter of this year.

The Ministry of Strategy and Finance, which has drawn up a 17 trillion won supplementary budget and is waiting for parliamentary approval, says the 0.9 percent quarter-to-quarter growth can’t be taken as a sign of economic recovery, saying it was a reaction to overly slow growth in the third and fourth quarters of 2012. In contrast, the Bank of Korea, which froze the key interest rate at 2.75 percent earlier this month, says its decision was proved right, interpreting the 0.9 percent gain as sign of an upturn.

It’s pitiful to see the nation’s two crucial policymaking organs quarreling again following their confrontation over whether to cut the benchmark rate earlier this month.

As things stand now, the odds appear in favor of the central bank, given that it was a surprisingly strong start for the year on the part of Asia’s fourth-largest economy. The first-quarter growth was the strongest quarterly expansion since the first quarter of 2011, when the economy grew 1.3 percent.

It was encouraging that exports, which account for nearly half of the GDP, gained 3.2 percent on-quarter in the January-March period despite the yen’s devaluation that makes Korean products more expensive in overseas markets.

Considering that skeptics had predicted a 0.4-0.5 percent on-quarter growth, the first-quarter result may be satisfactory. Yet the situation doesn’t warrant optimism. Private consumption contracted 0.3 percent in the first quarter, compared with the 0.8 percent gain in the fourth.

The 1.5 percent year-on-year growth falls far short of the nation’s potential growth rate of 3-4 percent and the growth rate has stayed below 1 percent for the eighth straight quarter. Moreover, the yen’s weakness will be felt in earnest from the second quarter.

This is no time for the government and the central bank to argue over our economic status at leisure. What’s needed is to respond flexibly with proper remedies after making an accurate diagnosis of the economy.

Last but not least, the ruling and opposition parties need to approve the extra budget bill as soon as possible, given that they concur on the need for additional fiscal spending. The government also must speed up outlays so that the embers of our growth engine are not put out.