Deregulation vital to growth recovery in 2020
Reviving the slumping economy is no less important than any other issue facing South Korea this year, as the country cannot improve the people's livelihoods without an economic recovery. It is therefore imperative for the Moon Jae-in administration to leave no stone unturned in creating more jobs and boosting economic growth.
The liberal government has already set its growth target for this year at 2.4 percent, up from the estimated 2 percent growth in 2019. This target appears not too high compared with the robust figures of 4 percent to 5 percent in the past. Yet pessimists predict the economy may grow by no more than 2 percent. Their gloomy forecast seems to hold water, given the many adverse domestic and international factors.
Let's look at the 2019 economic report card. Exports, the nation's main growth engine, contracted 10.3 percent from 2018, the worst performance since 2009 when Korea was hit by the fallout of the 2008 global financial crisis. The country's overseas shipments nosedived for the 13th consecutive month in December, on the back of a global downturn and the U.S-China trade war.
More seriously, the consumer price index rose a mere 0.4 percent, the lowest Korea has recorded since it started compiling inflation data in 1965. This is raising fears of deflation as the country is mired in the vicious cycle of an economic slump, falling consumption and production, and lower price hikes. Concerns are growing that Korea may suffer a long-term slowdown resembling the lost decades of Japan.
Now the Korean economy stands at a crossroads ― whether it will make a turnaround, or fall into a deeper slump ― so 2020 is a very important year to decide on its success or failure. It is seen as the last opportunity for the Moon administration to put the economy back on track and improve its growth potential.
For this reason, President Moon should put a top priority on economic reinvigoration. This, of course, is not to say that the chief executive can neglect other crucial issues such as inter-Korean ties, North Korea's denuclearization, the fight against corruption and the reform of every sector of our society. He must double down on jump-starting the economy because it is much more difficult to reconstruct the economy once it plunges into a crisis.
For starters, the government needs to review its economic policies to see what has gone wrong since Moon took office in May 2017. The President has pushed for an "income-led" growth policy to boost pay, particularly for poorer workers. But this policy has so far failed to have any impact. His other policy of innovative growth has also hit a snag due to the slow pace of the removal of cumbersome regulations.
Thus the Moon administration is required to push for deregulation more drastically to encourage innovation. It also should create a more market- and business-friendly environment to attract more corporate investment in new technology-based industries for the Fourth Industrial Revolution.
Reviving the slumping economy is no less important than any other issue facing South Korea this year, as the country cannot improve the people's livelihoods without an economic recovery. It is therefore imperative for the Moon Jae-in administration to leave no stone unturned in creating more jobs and boosting economic growth.
The liberal government has already set its growth target for this year at 2.4 percent, up from the estimated 2 percent growth in 2019. This target appears not too high compared with the robust figures of 4 percent to 5 percent in the past. Yet pessimists predict the economy may grow by no more than 2 percent. Their gloomy forecast seems to hold water, given the many adverse domestic and international factors.
Let's look at the 2019 economic report card. Exports, the nation's main growth engine, contracted 10.3 percent from 2018, the worst performance since 2009 when Korea was hit by the fallout of the 2008 global financial crisis. The country's overseas shipments nosedived for the 13th consecutive month in December, on the back of a global downturn and the U.S-China trade war.
More seriously, the consumer price index rose a mere 0.4 percent, the lowest Korea has recorded since it started compiling inflation data in 1965. This is raising fears of deflation as the country is mired in the vicious cycle of an economic slump, falling consumption and production, and lower price hikes. Concerns are growing that Korea may suffer a long-term slowdown resembling the lost decades of Japan.
Now the Korean economy stands at a crossroads ― whether it will make a turnaround, or fall into a deeper slump ― so 2020 is a very important year to decide on its success or failure. It is seen as the last opportunity for the Moon administration to put the economy back on track and improve its growth potential.
For this reason, President Moon should put a top priority on economic reinvigoration. This, of course, is not to say that the chief executive can neglect other crucial issues such as inter-Korean ties, North Korea's denuclearization, the fight against corruption and the reform of every sector of our society. He must double down on jump-starting the economy because it is much more difficult to reconstruct the economy once it plunges into a crisis.
For starters, the government needs to review its economic policies to see what has gone wrong since Moon took office in May 2017. The President has pushed for an "income-led" growth policy to boost pay, particularly for poorer workers. But this policy has so far failed to have any impact. His other policy of innovative growth has also hit a snag due to the slow pace of the removal of cumbersome regulations.
Thus the Moon administration is required to push for deregulation more drastically to encourage innovation. It also should create a more market- and business-friendly environment to attract more corporate investment in new technology-based industries for the Fourth Industrial Revolution.
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