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ED Stunted economic growth

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  • Published Oct 25, 2019 4:57 pm KST
  • Updated Oct 25, 2019 4:57 pm KST

All-out efforts needed to keep GDP increase above 2 percent

The nation's economy grew only 0.4 percent in the third quarter from the preceding three months, the Bank of Korea said Thursday. Because there are few ways to lift the growth rate drastically under the current economic conditions at home and abroad, a 2 percent increase in gross domestic product (GDP) for 2019 seems all but impossible. If the annual growth rate falls below 2 percent, it will be the third time following 1998 amid the Asian currency crisis and 2008 in the middle of the global financial crisis.

The quarterly economic growth rate plunged to minus 0.3 percent in the first three months, then surged back to 1 percent in the second quarter, but sank to 0.4 percent in the third quarter. The 1 percent rise in the April-June quarter was attributable to the sharply higher government contribution after the government executed its fiscal expenditure earlier than initially planned. However, because the government's budgetary input is limited, the frontloading of budget disbursement will likely dry up available financial resources toward year-end.

The economic growth rate is an index that comprehensively gauges a nation's economic conditions. The slowing growth rate means the index's three core elements ― consumption, investment and exports ― are losing vigor and remaining sluggish. The steep fall in the growth rate sharply reduces the nation's ability to create jobs, which, in turn, leads to a slump of consumption and investment ― and eventually to slow growth. This is why all economic players should make desperate efforts to keep Korea from falling into a vicious cycle.

Major international economic institutes have revised this year's growth rate for Asia's fourth-largest economy to below 2 percent. It is a small surprise that President Moon Jae-in repeated the word “investment” 10 times during a hurriedly arranged economic meeting last week. Moon even raised the need to revive the construction boom, which had long been taboo within the governing camp, reflecting his desperation to keep the economy afloat.

All this leads to one conclusion: Moon's economic team should mobilize all possible means available with a grave sense of crisis as well as coming up with ways to facilitate private investment and exports.