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(EDITORIAL from Korea Times on Aug. 13)

All News 07:05 August 13, 2020

Upward revision
OECD forecast not cause for complacency

The Organization for Economic Cooperation and Development (OECD) provided an upbeat projection for Korea Inc. for 2020, revising its economic forecast upward to a 0.8 percent contraction from the 1.2 percent shrinkage it predicted in June. With that Korea became the first country among the 37 member nations to have its economic outlook upgraded by the OECD since the COVID-19 pandemic took hold. Albeit conditional on a premise that a second wave of infections does not occur in the second half, it is a small ray of sunlight to spark hope for a weary nation.

The rich nations' club assessed Tuesday that Korea's management of the pandemic without a lockdown minimized the economic fallout. In addition, Korea' s "New Deal" programs that will inject 114 trillion won ($96 billion) into the economy through 2025, was assessed positively as a measure to support sustainable and inclusive economic growth.

Set against the average 7.5 percent contraction expected for member nations, the figure bodes well for Korea. Korea's 3.3 percent contraction recorded in the second quarter was cited as one of the reasons for the upgrade, the same reason the government is expecting a rebound in the second half. But stacked against a mix of external elements including the growing tension between China and the United States, and declining domestic economic indices, we should caution against too-rosy an outlook.

In the same survey, the OECD forecast the Korean economy to grow 3. 1 percent in 2021, which would render Korea to the 34th among 37 member countries.

Domestic figures out since Tuesday have all been dismal. The finance ministry said that Korea suffered a record budget deficit of 111 trillion won ($93.6 billion) in the first half of the year, because of a fall in tax revenue and hikes in government spending.

Exports fell by 23.6 percent in the first 10 days of August over the same period a year ago. The jobless rate for July, released Wednesday, stood at 4 percent.

With the pandemic showing no signs of abating, pessimistic figures are likely to be brought forward in the days ahead. Positive sentiment is critical for the economy. But policymakers' words and perception should be in step with the economic data. The government should bear in mind the OECD also recommended that it continue to support households and businesses until a full recovery, and to ensure it maintained long-term fiscal sustainability.
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