IMF forecasts Korea’s growth rate to be lowered by 0.3 percentage points to 3.0%
The global growth rate was also lowered by 0.5 percentage points for the first time in three months.
We need to put aside the rosy outlook and face reality in a cool way.
[세종=뉴스핌] Reporter Jeong Seong-hoon = Do you know and pretend you don’t know, or do you know and distort the truth?
Despite unfavorable conditions such as the spread of the COVID-19 mutation and unrest in the global economy and global supply chain over the possibility of a US base rate hike, the government is praising Korea’s rapid recovery of economic growth. It is worth emphasizing the crisis once, but every time, he only shows contempt, saying that ‘the government responded well in an early stage and it is leading to good results’.
| Jeong Seong-hoon, Deputy Minister of Economic Affairs |
The government’s position has not changed since the World Monetary Fund (IMF) released the revised World Economic Outlook (WEO) for this year on the 25th. The International Monetary Fund (IMF) predicted that the recovery trend of the global economy will slow this year due to the spread of Omicron mutation, the slowing recovery of the two major powers, the US and China, and inflation (inflation). It also lowered the global economic growth forecast for this year by 0.5 percentage points to 4.4 percent for the first time in three months.
The Korean economy also predicted that the situation would not be good due to the spread of Omicron and the downward revision of economic forecasts by major trading countries. At the same time, it lowered Korea’s economic growth rate for this year by 0.3 percentage points from the original forecast of 3.3%.
However, the government has been ignoring this situation. That’s a reasonable downgrade. It was also evaluated that the government’s response was timely despite the difficult economic situation. There was also no sense of crisis.
Immediately after the announcement of the IMF, the Ministry of Strategy and Finance issued an unconvincing position, saying, “The IMF forecast is slightly lower than the Korean government’s forecast, but the IMF forecast is the most recent and the impact of Omicron has been largely reflected.” In other words, it is said that if the omicron mutation had not spread, it could have bypassed the government forecast.
“The average growth rate (2.01%) for 2020-2022, which removes the base effect from the corona shock, exceeds the growth rate of all of the major G7 advanced countries,” he said. We will continue the flow,” he said confidently.
The reason the government is showing overconfidence in economic growth is probably because the Bank of Korea announced on the same day that its gross domestic product (GDP) growth recorded 4.0% last year, the highest in 11 years. The government initially projected the annual growth rate for 2021 at 3.2%, then raised it to 4.2% and then lowered it to 4.0% in December last year. Although it does not live up to the government’s expectations, it seems to be relieved at the higher-than-expected growth rate.
Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki, the head of the economy, said, “The Korean economy is the fastest and fastest among the G20 advanced countries through 4% growth last year, the second year of the Corona 19, after minimizing the extent of negative growth in 2020, the first year of the Corona 19 crisis. A strong recovery trend has been achieved.”
However, there is one weak point in the announcement of the Bank of Korea. Since the economic growth rate is compared with the previous year, the interpretation may be different depending on the economic situation of the previous year. In 2020, when the COVID-19 outbreak occurred, Korea’s economic growth rate recorded -0.9%, showing ‘reverse growth’. It can be misunderstood that the resulting base effect has greatly contributed to the economic situation. It is the first time in 22 years since the 1998 foreign exchange crisis (-5.1%) that the economic growth rate was negative. That is proof that the recent economic situation in Korea is difficult.
The economic situation this year cannot be more optimistic. The Organization for Economic Cooperation and Development (OECD), a global economic policy research institute, and representative credit rating agencies Fitch and Moody’s, set Korea’s economic growth rate at 3.0 to 3.2 percent this year. However, as the burden on households increases due to global fiscal tightening, the economy is highly likely to shrink.
Here, the spread of micron mutations is at a frightening level. The government dismisses it as a cold, but economic activity is bound to shrink as it is several times more contagious than the common cold. The competition for hegemony between the two major powers, the United States and China, is also degenerating into a behavior of ‘eating the flesh’. The economic situation in Europe is also not favorable due to the conflict between Russia and Ukraine and the spread of the COVID-19 mutation. Oil prices, which were expected to fall at the end of last year, are continuing their high march again. Goldman Sachs, an American investment bank, predicts that the international oil price will exceed $100 per barrel within the year.
Despite these circumstances, the government is still holding on to the economic growth rate of 3.1% this year. Deputy Prime Minister Hong emphasized at a New Year’s press conference this month, “provided that various policy support effects work strongly, this year’s growth target of 3.1% is still in effect.” In the end, he intends to overcome the current economic crisis with government financial support.
However, the government’s fiscal spending may someday reach its limit. The financial deterioration could lead to a bigger national crisis. It seems necessary to put aside the rosy outlook for the achievements of the Moon Jae-in administration and to face the cold reality. Considering the various economic conditions, now is the time.
jsh@newspim.com
