In a meeting with reporters last week, Finance Minister Choi Kyung-hwan dismissed warnings that the South Korean economy may be facing its worst ever conditions as exaggerated.
“Some have said our economy is heading toward a grave crisis, but all data are showing South Korea is doing better than most of its peer countries under difficult situations,” he said, Yahoo reported.
Choi, who concurrently serves as deputy prime minister for economic affairs, argued that if exports had not fallen, Asia’s fourth-largest economy could have expanded by nearly 4% this year. As he indicated, declining exports are projected to push down the country’s 2015 growth rate by about 1 percentage point below 3%.
Still, his remarks were rebuffed by economists here as far from reality. They note that the South Korean economy is becoming mired in a complicated set of problems that might be resolved only through speedy and thorough structural reforms.
“None of the difficulties confronting our economy are easy to solve,” said Cho Young-moo, an analyst at LG Economic Research Institute. “Temporary stimulus measures may no longer be instrumental in revitalizing the economy.”
Steeper Decline
The combined turnover of South Korean companies, which decreased by 1.2% last year, marking the first annual decline since the national statistical office began compiling related data in 2006, is expected to shrink at a steeper pace this year.
More than 3 in 10 local firms have failed to generate enough profits to pay interest on their debts for three consecutive years.
Amid a slump in global trade, the country’s exports fell by 7.4% from a year earlier in the first 11 months of the year. With their competitiveness eroded by rivals from both advanced and emerging nations, South Korea’s manufacturing exporters, which have led the country’s rise to become a major economic powerhouse, are becoming more of a drag on its growth.
The economic team headed by Choi, who took office in July last year, has tried to shore up the economy with a series of measures to bolster domestic demand. The finance minister’s remarks last week might be seen as pointing out that the efforts to boost the property market and consumer spending had prevented the economy from being drawn into a steep downturn.
But economists note such stimulus measures have treated only the symptoms, rather than the underlying cause of South Korea’s deepening economic woes.
In fact, South Korea has seen its ratio of national debt to gross domestic product on the brink of surpassing 40% and household debt rising near to 1.2 quadrillion won ($1 trillion) as Choi has been pushing to galvanize domestic expenditure by drawing up a supplementary budget, reducing consumption tax rates and holding nationwide sales promotion events.
The chief economic policymaker said at a year-end meeting with reporters that the South Korean economy would face tough challenges in 2016 as overall conditions at home and abroad might show little improvement.
“Everyone must be on guard as the New Year is certain to be full of difficulties,” said Choi, a third-term lawmaker.
