Published : 2013-10-27 19:00
Updated : 2013-10-27 19:00
The nation’s economy is regaining vitality, as is evidenced by growth in gross domestic product in the third quarter of this year. The Bank of Korea says GDP grew 1.1 percent from the previous quarter and 3.3 percent from a year ago.
Growth was anemic a year ago. The third quarter of 2012 marked zero gain. Then growth began to pick up ― 0.3 percent in the fourth quarter of 2012, 0.8 percent in the first quarter of 2013 and 1.1 percent in the second quarter.
Moreover, it was the first time in seven quarters for the economy to post 3-plus percent year-on-year growth. Should it grow just 0.8 percent in the final quarter, the economy will not have missed the central bank’s 2.8 percent growth outlook for 2013.
Of course, the current level of recovery is anything but satisfactory. The economy has a long way to go until it recovers its past vitality, with yearly growth posted at 5 percent to 6 percent, if not at a higher level.
Yet, the central bank says the economy shows some healthy signs, with consumers opening up their purses, investment in plants and equipment turning from contraction to expansion, and spending on construction picking up. No wonder optimism is gaining foothold, with some economic experts now saying that the 2014 growth target of 3.9 percent will not be beyond the nation’s reach if the trend continues.
But others warn that numerous obstacles to growth are lying ahead on the path to full recovery. Most threatening among them is the strengthening Korean currency.
As the won hit its highest level in more than two years against the U.S. dollar, the central bank and the Ministry of Strategy and Finance had to talk it down on Thursday. Unconfirmed news reports said the central bank also intervened to stem the won’s rise, siphoning off $2 billion from the foreign exchange market.
The won’s rise will be inevitable if the Korean economy continues to firm up. As if to acknowledge there is a limit to its market intervention, the central bank said it was the high speed at which the won was rising, not the won’s strengthening itself, that mattered. In other words, the central bank was saying that corporations will eventually have to absorb the impact of the won’s rise on their exports.
This is not to say that there is nothing that can boost growth. On the contrary, the administration needs to invigorate the wilting property market, create jobs in the service industry in particular and encourage foreign direct investment.
What the administration needs to do to keep the growth momentum going is to collaborate with the ruling party for the passage of the underlying bills through the National Assembly during its current regular session. Few economic issues pending now are as important as their passage.