Gov't fails to reflect reality in 2021 economic projection
The government came up with a package of economic policies during an extended meeting of economy-related ministers Thursday, featuring, among others, 3.2 percent growth for the year 2021. It predicted a recovery of both exports and domestic consumption, boosted by the expected improvement of global trade and the semiconductor industry coupled with expanded fiscal measures.
It forecast the creation of 150,000 jobs, and commodity prices climbing by 1.1 percent from this year's zero percent level, prompted by the possible increase in demand. Many experts say the outlook is too rosy even when reflecting a base effect from an economic contraction this year. Three percent growth seems implausible for now in the light of the possibility that the COVID-19 pandemic will continue to surge through early next year.
Deputy Prime Minister and Finance Minister Hong Nam-ki said, "Next year will be a critical period to overcome the coronavirus pandemic. We will focus on consumption and employment, which are closely related to the people's livelihoods given the difficulties faced with the in-person service providers."
But Vice Finance Minister Kim Yong-beom acknowledged that the economic outlook failed to reflect the surging COVID-19 pandemic. "In mapping the outlook, we were not able to reflect the possibility of notching up social distancing to Level 3. Once the level is raised in the near future, we will have to modify it."
The ministry's economic projection compares to forecasts by diverse economic organizations ― the Bank of Korea, Korea Development Institute, and International Monetary Fund ― which came up with forecasts ranging from 2.8 percent to 3.1 percent. The growth will highly likely remain lower as such forecasts were made without considering the recently rapid surge in the number of new infections here to more than 1,000 per day.
The central bank even warned that the economic growth will hardly reach 2.2 percent next year unless the pandemic abates. Experts share the notion that it will be impossible for the nation to attain economic growth rates that it registered before the pandemic. They say the nation has lost economic strength as a result of prolonging sluggish domestic consumption, and will not be able to gain momentum again before the year 2022.
The government has failed to present specific measures needed to stimulate the sagging economy, only relying on rosy prospects in the area of automobiles and semiconductors. It is seeking to boost consumption with tax incentives and credit card favors ― but such measures are not enough.
The economy can pick up steam only when companies expand their businesses scope with new investments, which will boost growth and create more employment. The government should stop attempts to introduce more regulations against enterprises. Instead, it needs to take steps to encourage investment and deregulation.
The government came up with a package of economic policies during an extended meeting of economy-related ministers Thursday, featuring, among others, 3.2 percent growth for the year 2021. It predicted a recovery of both exports and domestic consumption, boosted by the expected improvement of global trade and the semiconductor industry coupled with expanded fiscal measures.
It forecast the creation of 150,000 jobs, and commodity prices climbing by 1.1 percent from this year's zero percent level, prompted by the possible increase in demand. Many experts say the outlook is too rosy even when reflecting a base effect from an economic contraction this year. Three percent growth seems implausible for now in the light of the possibility that the COVID-19 pandemic will continue to surge through early next year.
Deputy Prime Minister and Finance Minister Hong Nam-ki said, "Next year will be a critical period to overcome the coronavirus pandemic. We will focus on consumption and employment, which are closely related to the people's livelihoods given the difficulties faced with the in-person service providers."
But Vice Finance Minister Kim Yong-beom acknowledged that the economic outlook failed to reflect the surging COVID-19 pandemic. "In mapping the outlook, we were not able to reflect the possibility of notching up social distancing to Level 3. Once the level is raised in the near future, we will have to modify it."
The ministry's economic projection compares to forecasts by diverse economic organizations ― the Bank of Korea, Korea Development Institute, and International Monetary Fund ― which came up with forecasts ranging from 2.8 percent to 3.1 percent. The growth will highly likely remain lower as such forecasts were made without considering the recently rapid surge in the number of new infections here to more than 1,000 per day.
The central bank even warned that the economic growth will hardly reach 2.2 percent next year unless the pandemic abates. Experts share the notion that it will be impossible for the nation to attain economic growth rates that it registered before the pandemic. They say the nation has lost economic strength as a result of prolonging sluggish domestic consumption, and will not be able to gain momentum again before the year 2022.
The government has failed to present specific measures needed to stimulate the sagging economy, only relying on rosy prospects in the area of automobiles and semiconductors. It is seeking to boost consumption with tax incentives and credit card favors ― but such measures are not enough.
The economy can pick up steam only when companies expand their businesses scope with new investments, which will boost growth and create more employment. The government should stop attempts to introduce more regulations against enterprises. Instead, it needs to take steps to encourage investment and deregulation.
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