Finance Minister Hong Nam-ki, who marked one year in office Tuesday, recently posted a message on Facebook to stress the importance of psychology in running the economy.
The direction of the national economy hinges on the psychology of economic actors plus economic fundamentals, he said, asking all economic actors to have confidence that they can overcome difficulties by joining forces.
His message sounds hollow and inappropriate, as the fundamentals of the economy have been weakening, with all economic indicators going downward.
The country saw a simultaneous decline in industrial output, facility investment and consumption in October, according to data released by the state statistics office last month.
Separate data from the Trade Ministry showed South Korea’s exports fell 14.3 percent on-year in November, extending their downward streak for the 12th consecutive month, amid the protracted trade row between the US and China, and a slump in global demand for semiconductors.
The Bank of Korea recently slashed its growth outlook for the country’s economy to 2 percent this year from its previous forecast of 2.2 percent in July. But many private institutes predict Asia’s fourth-largest economy will expand far below 2 percent, recording the lowest growth rate since 2009, when it grew 0.8 percent in the aftermath of the global financial crisis.
The outcome of a survey released Saturday by the Korea Enterprises Federation should particularly draw the attention of Hong, who doubles as deputy prime minister for economic affairs.
Nearly half of the 206 domestic firms surveyed plan to implement belt-tightening measures next year to cope with deteriorating business conditions at home and abroad. Over 60 percent said the economy was being drawn into a long-term slowdown.
Most respondents cited regulatory restrictions, labor-friendly policies and sluggish domestic demand as the biggest burdens on corporate activity. Only 16.8 percent were worried most about uncertainties in external conditions, to which Hong and other government officials have mainly attributed the economic slump.
In his inaugural speech, Hong put an emphasis on innovative growth, pledging to reinvigorate the economy through structural reform. He set the growth target for 2019 at 2.6-2.7 percent. A year later, the economic situation remains far from what he envisioned on his first day in office.
Critics say Hong has done practically nothing apart from expanding fiscal expenditure to carry forward the income-led growth policy.
In April, the Finance Ministry drew up a 5.8 trillion-won ($4.87 billion) supplementary budget in addition to the 2019 budget set at 469.6 trillion won. The 2020 budget, expected to be approved by the National Assembly largely without changes, will exceed 500 trillion won for the first time.
Expanded fiscal spending has done little to bolster the economy, with the policies pursued by President Moon Jae-in’s administration since it took office in 2017 having dampened corporate activity and market vitality.
Hong has been criticized for neglecting his role in coordinating policies to ensure that the country will not lag behind foreign competitors amid a new wave of industrial changes.
His voice was conspicuously missing during the recent passage by a parliamentary committee of a bill on effectively outlawing a pioneering ride-hailing service operator because of objections from taxi drivers.
This reticent attitude is in sharp contrast with his repeated emphasis on innovative growth -- in particular the sharing economy. Earlier he said there was no reason the country could not nurture the sharing economy, which has acquired a major role in other advanced nations.
A press release from the Finance Ministry said Hong had presided over more than 100 meetings of economy-related ministers over the past year. But it made no mention of what results such meetings had brought.
Hong should now undertake regulatory and labor reforms in earnest to carry forward innovative growth and promote new industries. At the same time, he should ditch or overhaul misguided policies, such as the income-led growth drive, which has not helped the underperforming economy.
He needs to assume a more active role in persuading President Moon, government and ruling party officials as well as vested interest groups to push through crucial reform needed to revive the economy and bolster its long-term growth potential.
Without these efforts, economic actors can hardly be expected to have confidence about the future of the economy.