By Choi Sung-jin
Debate between government and private economists about economy and what to do about it has been rekindled, yet again.
Some numbers indicating the health of national economy have improved recently, leading government officials to be optimistic of a recovery. But private economists say it is too early to talk about recovery: “One swallow does not make a spring,” one leading economist said.
At an economic ministers’ meeting on Thursday, Minister of Strategy and Finance Yoo Il-ho said, “The national economy seems to be getting out of the downswing that gripped it since early this year.” Bank of Korea Governor Lee Ju-yeol agreed, saying, “There are some positive signals such as the rebound of international oil prices and the improvement of consumer sentiment.”
The nation’s top economic and monetary policymakers appeared to think the economy might have not yet started to recover, but began to got out of the dire situation early this year.
Korea’s industrial production, for instance, increased 3.3 percent in February, buoyed by brisk output of semiconductors, which increased 19.6 percent year-on-year, and metal processing, up 12.5 percent, recording the biggest growth in six years and five months, according to Statistics Korea.
The Bank of Korea said the business survey index (BSI) in March rose five points to 68, marking the first rise in five months, and the consumer sentiment index climbed for the first time in four months to 100, indicating an increasing number of businesses and consumers are optimistic about the national economy. The BSI in the second quarter, as measured by the Korea Chamber of Commerce and Industry, jumped 10 points to 91.
Exports in March fell 8.2 percent from a year ago but it was a less steep fall compared with the three preceding months when shipments overseas fell in double-digit numbers. KOSPI (Korea Stock Price Index) has also restored much of its loss to be above 2,000 again. Apartment prices in Seoul edged up 0.05 percent, the biggest gain this year. These upward movements favorably affect consumer sentiment.
Private economic experts view the economy somewhat differently.
Most say it is meaningless to discuss economic recovery based on improvements of a handful of indicators while there are no fundamental changes in external environment. Without the improvement of indexes in investment and consumption in particular, it is difficult to anticipate even a slow recovery, they say, pointing out that business investment fell 6.8 percent and private consumption edged down 1.8 percent.
“The slowing pace of the fall in exports is of course a good signal, but it is too early to say the economy has turned for the better based on that figure,” said Kim Do-hoon, head of the Korea Institute for Industrial Economics and Trade. “The government needs to pay greater attention to preventing any further fall in domestic demand than to exports (which are largely determined by overseas situations).”
Most experts advise the government to take a longer-term perspective. They say the economy still remains at the bottom level despite the government’s all-out efforts to stimulate it.
“The BSI appeared to rise in February mainly because it was very low in January,” said Hyundai Research Institute researcher Lee Jun-hyup. “If we watch the two months together, the trend is not so positive, however. A deeper look at these indicators tells us it is hard to say the economy is recovering.”
Other researchers were similarly cautious. “There are expectations that the economy would turn for the better given the improved external environment,” said Kim Seong-tae, a fellow at the Korea Development Institute, a government think tank. “The government is doing all it can to prevent economy’s from getting worse, rather than making it improve.”