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(EDITORIAL from Korea Times on July 2)

All News 07:01 July 02, 2018

Alarm over economy
Stronger action needed to avoid recession

Dark clouds seem to gather over the Korean economy as indicators show a bleak outlook. Consumption, investment and exports are in the doldrums, signaling that the country is entering a recession.

According to Statistics Korea, facility investment fell 3.2 percent in May from a month earlier, marking a decrease for three months in a row. Retail sales dropped 1 percent, posting negative growth for the second straight month.

Furthermore, exports _ the country's longtime driving force for economic growth _ have also become sluggish. Preliminary data compiled by the Ministry of Trade, Industry and Energy showed outbound shipments edged down 0.09 percent to $51.23 billion last month from the year before. This dwindling figure can be compared with a 1.5 percent decline in April and a 13.5 percent rebound in May.

Simply put, an alarm bell has begun to ring over Asia's fourth-largest economy. Worse, the economy may face more downside risks because of a looming trade war between the United States and China and a potential downturn in the global economy.

These negative factors could make it hard to realize the government's economic growth target of 3 percent this year.

Much to the public's disappointment, however, the Moon Jae-in administration seems to be turning a deaf ear to the warnings. President Moon recently changed his two senior presidential secretaries: one for economic affairs and another for job creation. The reshuffle came amid worsening job conditions and a lackluster economy.

The number of employed people reached 27.06 million in May, up 72,000 from the same month last year. This was the lowest rise since January 2010, falling far short of the government target of an annual average of more than 300,000. The unemployment rate hit an 18-year high of 4 percent.

The figures show Moon's signature policy of "income-led growth" has achieved little to nothing since his May 2017 inauguration. His policy is aimed at giving workers a higher income, especially the poor, by creating more jobs and giving irregular workers a more permanent status.

However, ironically, the policy has led to a sizable fall in the number of jobs. This is because employers _ particularly smaller firms and the self-employed _ have reduced the workforce due to a steep rise in the minimum wage. A shortened 52-hour workweek, which took effect Sunday, will also place more financial burdens on businesses.

However, the presidential office has vowed to continue the income-based growth policy, showing the government will not acknowledge the policy's failure. The Moon administration should realize it is high time to overhaul the policy in a bid to rectify its errors and set a new course to create jobs and boost the economy.

The President has also pushed for another policy of "innovative growth." But regrettably, this policy has not made any progress either. Deregulation is essential to innovative growth, yet the government has done little for deregulation.

The government should stop shouting empty slogans. Instead it must take radical steps to promote innovation by initiating regulatory reform. Action is needed before it is too late.


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