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(EDITORIAL from the Korea Times on March 2)

All News 07:00 March 02, 2016

Pessimism about economy
It's time to revitalize corporate sentiment

While delivering a speech commemorating the 97th anniversary of the March 1 Independence Movement Day on Tuesday, President Park Geun-hye urged the nation to join forces to create a new Korea.

People can fully understand her strong aspiration to usher in prosperity at a time when the nation's first female head of state is entering her fourth year in office of a five-year tenure.

Things hardly seem easy though. Corporate sentiment has nosedived because external economic conditions remain unstable as a result of slowdowns in China and other emerging economies and jitters in the global financial markets.

The Bank of Korea's manufacturing business survey index hit 63 in February, down 2 points from January. The index has fallen for four months in a row and is now at its lowest level since March 2009, when the Korean economy was still reeling from the aftermath of the global financial meltdown.

The February indicator is even lower than the 66 recorded in June last year, when consumer sentiment remained in the doldrums at the height of Middle East Respiratory Syndrome. A BSI reading below 100 means more companies are pessimistic about the economy and vice versa.

As a natural consequence of the depressed sentiment, companies appear reluctant to invest and recruit. About 20 of the country's top 30 conglomerates have reportedly yet to finalize their investment plans for this year.

A survey of chief executives conducted by the Korea Employers Federation late last year also showed that more than half of the respondents had intentions to tighten their belts.

Statistics on jobless college graduates, announced by Statistics Korea on Monday, also makes President Park's promise to open a new era of hope and happiness sound hollow.

According to the statistics, the number of university graduates who are not seeking jobs has more than doubled over the past 15 years to reach 3.34 million last year. The economically inactive population holding university degrees or higher broke the 2-million mark in 2004 and the 3-million milestone in 2013. Last year's figure of 3.34 million represented a 4.7 percent increase from 2014, the biggest rise since 2009.

The economically inactive population refers to those aged 15 and older who are unable to work or do not want a job. It's dumbfounding that so many university graduates are economically inactive. This is not only disastrous for individuals but also for the society as a whole.

Corporate pessimism about the economy stems in large part from economic uncertainties.

On the external front, concerns about China's downturn, coupled with Japan's introduction of a negative interest rate, oil price plunge and North Korea's nuclear and missile threats, make executives increasingly nervous. Domestically, export slowdown, chronically weak domestic demand and swelling household debt are adding to uncertainties.

Therefore, it will be all but impossible for Korea to attain the central bank-set growth target of 3 percent this year.

What is needed most is for the government to take preemptive actions to prevent corporate sentiment from going sour further by removing uncertainties as soon as possible. The government should also hurry to carry out the restructuring of less competitive industries such as shipbuilding and steel.

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