Park fails to underpin economy

By Park Hyong-ki

Former President Park Geun-hye will go down in history not only as the first female president and the first to head of state to be ousted, but also as one of the worst leaders for the Korean economy.

The market here viewed her as a president who accomplished next to nothing for the economy, following the Constitutional Court’s impeachment ruling last Friday.

In comparison with her predecessors such as Roh Moo-hyun and Lee Myung-bak, the economy under the former Park administration has struggled.

The country grew 2.9 percent a year on average over the four years she was in office. This marked the lowest since the launch of the Kim Young-sam government in 1993.

The economy grew 4.5 percent during the Roh Moo-hyun administration (2003-2008), and 3.2 percent during that of Lee Myung-bak (2008-2013).

The country’s household debt and youth unemployment rate soared between 2013 and 2016.

Park saw the debt increase by almost 10 percent annually backed by low interest rates and relaxed borrowing rules for salaried workers.

The government initially sought to spur private spending and the construction industry through such easy-money measures to boost the economy.

However, it backfired with the economy ending up with uncontrollably high debt at over 1,300 trillion won and continuous sluggish consumption.

The national debt also increased by about 200 trillion won to 638.5 trillion won last year from 2012. The local job market is not a pretty sight, either.

Asia’s fourth-largest economy faces the worst employment market for the young as the youth joblessness rate reached a record 9.8 percent last year. This was due to ongoing corporate debt restructuring and companies reluctant to hire amid a protracted economic slump.

However, analysts say conglomerates’ persistent unfair business dealings with small- and medium-sized enterprises (SME) made it more difficult to create jobs and redistribute wealth. Job creation from SMEs accounts for more than 70 percent of the total.

Park’s key economic policy supporting tech start-ups initially sought to change the country’s archaic structure focused on chaebol for growth.

Hopes were high for this policy to transform the economic paradigm and create a market equivalent to Silicon Valley in the U.S. But it did not bear any fruit as the latest political scandal involving Park and chaebol has undermined it.

“It just ended with conglomerates just backing the establishment of start-up centers here,” independent economist Chu Jin-hyung said.

Exports, which Korea relies on the most for growth, reached $495.4 billion last year, a record low.

The market here, overall, views Park’s economic policy including the “474” policy and welfare without tax hikes as a failure.

In 2014, Park introduced 474 with the aim of achieving 4 percent growth; 70 percent employment rate; and per capita income of $40,000 within her term.

Korea’s per capita income still remains under $30,000. In 2015, it decreased to $27,340 from $28,071 in 2014.

The next government is expected to be in a difficult situation to “clean up and heal” the scars Park left behind, analysts say.

“It is too early to judge the feasibility of economic policies introduced by potential candidates at this point. The next leader is expected to face mounting challenges ahead,” said Kim Doo-un, an economist at Hana Financial Investment.

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