Growing Optimism

Policymakers Need to Initiate Exit Strategy

A global survey has shown that South Koreans are becoming more optimistic about economic recovery faster than any other people around the world. It is good to see domestic consumers losing their pessimism about the economic outlook. This improving sentiment is a direct reflection of the rebounding economic growth. The nation is expected to emerge as one of the fast recovering economies next year after posting a mild contraction this year.

According to the survey conducted in June by the Worldwide Independent Network for Market Research (WIN), only 27 percent of Koreans said they thought the economy would get worse over the next three months. An average 33 percent of consumers worldwide responded the same way. In December, 70 percent of Koreans harbored pessimism in the wake of the unprecedented global economic crisis. The figure dropped to 44 percent in March. During the six-month period until June, the ratio fell by 43 percentage points, the steepest among 22 countries.

But Koreans showed relatively lower credibility on the government's capability of managing the economic crisis, giving 4.3 points out of a full 10 points. The global average stood at 4.8 points. China topped the list with 7.2 points, followed by Saudi Arabia (6.4 points), India (6.3 points) and Brazil (6.1 points). Russia received 5.2. This indicated that emerging economies, including the so-called BRIC countries, have fared relatively well to win higher public trust. BRIC stands for Brazil, Russia, India and China.

It is necessary for the Seoul government to humbly accept the results of the survey in order to get more public trust in its economic policies. The Lee Myung-bak administration should admit that its policies have often lacked coherency and consistency. It has eased its tough anti-speculation measures too early, creating a property bubble even before the county takes a recovery path. A massive fiscal stimulus, tax cuts and monetary easing have been inevitable steps to jumpstart the moribund economy.

But those tools have done little to create jobs, expand the social safety net, and bring real benefits to the poor and underprivileged. Nevertheless, the Lee administration is pressing ahead with a four-river refurbishment project which will cost 22.8 trillion won over the next three years. Policymakers are trying to cut welfare outlays to finance the mammoth project. Critics are calling for the scrapping of the project, demanding that more taxpayer money should be funneled into job training, education, healthcare and other urgent programs for those suffering most amid the economic crisis.

It is also necessary for the government to shift its focus from a stimulus-oriented policy to an exit strategy so that it can better prepare for a post-crisis economy. We cannot overemphasize the importance of preemptive measures to avoid the side effects of fiscal and monetary expansion that could bring about hyperinflation and property speculation. Rising consumer optimism can no longer be tenable without timely and credible policies for sustainable growth.