“This year, we will fully recover our daily lives and leap forward as a leading country in a new era with a fast and strong economic recovery.”
In his New Year’s address on the 11th, President Moon Jae-in showed strong confidence in the economy. President Moon said, “Now I can finally see the end of the dark tunnel. A lot of uncertainties have been lifted, and now we can predict, forecast and plan.” As President Moon said, is the Korean economy on a fast and strong recovery trend?
There are two main indicators for President Moon’s economic recovery. It is economic growth rate and exports. President Moon said, “Our economy has already turned to positive growth from the third quarter of last year.” .
Gross domestic product (GDP) growth rate. Graphic = Kim Hyun-seo [email protected]
As President Moon said, gross domestic product (GDP) in the third quarter of last year rose 2.1% from the previous quarter. However, this is just after the -1.3% in the first quarter of last year and -3.2% in the second quarter. It means that it has not yet recovered half of it from the economic shock caused by the novel coronavirus infection (Corona 19). The possibility of an economic rebound at the end of the year has also been overlooked due to the third spread of the corona that has emerged since last November. The Ministry of Strategy and Finance predicts last year’s economic growth rate at -1%. Even the government officially formulated the first negative (-) record since 1998 (-5.1%) when the financial crisis broke out.
Major institutions such as the International Monetary Fund (IMF) 2.9% and the Organization for Economic Cooperation and Development (OECD) 2.8% predict that Korea will grow by 2% this year. Even this is a number that does not reflect the third spread of Corona 19, which began in earnest since last November. If the growth rate reached -1% last year and 2% this year, it is less than the potential growth rate (2% per year), which in fact means that the Korean economy is entering a low-growth phase. It is far from President Moon’s proclamation of “fast and strong recovery”.
Lee Hye-hoon, a former member of the Future Integration Party, criticized this as “I am worried about the President’s perception of the economy.” He said, “Depending on where the standard of comparison is set, only the advantage of the economic growth rate, which is the difference between the heavens and the rivers, is highlighted,” he explained.
President Moon also praised the export performance. In December of last year, exports increased by more than 10% compared to the same period of the previous year, but December 2019, which was the target of comparison, was the time when the global export economy turned to the worst due to the trade conflict between the US and China. In 2018 alone, the average monthly export value was 50.45 billion dollars. Looking at last year’s total ($5129 billion), exports decreased by 5.4% from the previous year. It has been on the decline for the second consecutive year following 2018 (10.3% decrease).
Annual import and export performance. Graphic = Younghee Kim [email protected]
“Even if export indicators improve in the first half of this year, there will definitely be a base effect (statistical illusion that appears too low or too high in comparison target statistics). In this case, the delay in vaccination to other developed countries could adversely affect the domestic economy, including exports.”
With the re-proliferation of Corona 19, the sensational economy is sinking to the bottom, and President Moon declared, “Our economy will recover to pre-corona levels in the first half of this year.” Even if actual economic indicators such as employment, consumption, and investment improve in the first half of this year, it is likely a statistical illusion. This is because most economic indicators are released based on’compared to the same period of the previous year’. The first half of last year, which is the target of comparison, is the time when the Korean economy was in the worst shock due to the spread of Corona 19.
Tae-gi Kim, professor of economics at Dankook University, said, “This year, the government will pay enormous debts and budget, but it is difficult to say that the private situation such as domestic demand and consumption has improved because it is leaned on government finances. It will take longer.”
As President Moon said, only real estate and stock markets are recovering “fast and strong”. The reality is that prices have not been supported by the real economic recovery. “The problem is that the current (stock market boom) is due to large-scale debt, not liquidity supplied from the real world,” said Sung Tae-yoon, professor of economics at Yonsei University. He said, “In a situation where the real economy is unstable, there is still no government policy movement that will lead to a recovery in the corporate economy.” “It can be a big risk factor for you,” he warned.
Sejong = Reporter Cho Hyun-sook [email protected]