Reporter's Notebook Government urged to face reality in economic forecast

Finance Minister Hong Nam-ki answers questions from lawmakers during a National Assembly interpellation session in Seoul, Sept. 15. Yonhap

By Lee Min-hyung

The Korean government will continue to lose credibility regarding its economic policies unless it drops a “dogmatic attitude” towards the market and listens to realistic voices from experts.

No one would refute that public fury is reaching its peak over some controversies regarding economic policy drives by Cheong Wa Dae and the government's economic teams as the year-end approaches and the presidential election draws closer.

The Moon Jae-in administration has less than a year left in office, but its rather rosy outlook for the country's economic growth is taking criticism from the public.

First and foremost, the government has stuck to its 2021 inflation outlook of 1.8 percent, but the estimation seems far from reality, with a group of global economic institutions expecting Korea's annual inflation to top the 2-percent mark.

The OECD recently revised up the nation's inflation outlook by 0.4 percentage points to 2.2 percent this year, and the Asian Development Bank also inched up the forecast to 2 percent. But the government still maintains its earlier inflation outlook of 1.8 percent, which critics argue is quite tough for authorities to achieve due to planned public utility rate hikes and a series of other economic factors.

The government's firm rationale that an implementation of toughened regulations will help stabilize the white-hot housing market is also the key reason behind escalating rage particularly from those in their 20s and 30s. A “shoddy” set of housing regulations ended up causing adverse effects on the market during the past four years.

The approach that “government policy can defeat the market” proved to be wrong, as was shown by the continual surge in nationwide housing prices. Much is left to be desired in that the government does not have specific plans to revamp the approach, but instead, is sticking to its regulation-focused stance.

Finance Minister Hong Nam-ki recently reiterated the message that tough housing regulations would remain in place until the end of the administration's tenure.

“We have no plans to mitigate tax burdens on multiple homeowners,” he said in a recent National Assembly interpellation session. “Some argue that alleviating taxes on them will result in increased housing supply, but the impact on the market is unclear.”

But the remarks did not sound persuasive, as this was nothing more than a reiteration of the government's failed housing policy for the past four years. If the regulatory measure did not take effect on the market, the government should not continue pushing ahead with it. But this was not the case, which ended up further aggravating the economy and widening financial imbalances here.

The government should be reminded that a complete revamp of its economic policies is the only way to win back trust from the public.