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2017-12-04 15:19
Inclusive growth is more important than nominal figures

The central bank’s prediction that Korea’s per capita income will reach $30,000 next year is certainly good news for the people who have longed for a better future. Expectations are growing that President Moon Jae-in’s “income-led” economic growth formula will produce successful results to allow workers to earn higher incomes and enjoy better lives.

The prediction is based on an improving economic outlook. The Bank of Korea (BOK) forecast the nation’s economy to grow well over 3 percent this year on the back of the strong expansion of exports. The economy is expected to keep its growth momentum next year. Against this backdrop, the BOK said Sunday that per capita gross national income (GNI) may surpass $30,000 in 2018, up from $27,561 in 2016.

If Korea exceeds that level, it will be recognized as an advanced economy. According to the International Monetary Fund (IMF), only 27 out of 190 countries were above that level as of October 2016. Korea entered the $20,000 GNI era in 2006, but has never breached the $30,000 mark due to long-term economic doldrums.

However, the problem is that many people will not be euphoric at the better projection and the increased GNI. The reason is because they are not confident their real income will actually rise despite the rosy outlook. They are more worried about a decline in employment and income.

According to Statistics Korea, the number of newly employed people dropped 11 percent to 279,000 in October from September. Particularly, the youth jobless rate hit an 18-year high of 8.6 percent. The job market situation shows little signs of getting better anytime soon. What’s gloomier is that the average monthly real income per household fell by 0.2 percent to 4.39 million won ($4,040) in the third quarter from a year before. The income has been on a losing streak for the eight consecutive quarters.

In a nutshell, the country has failed to see a trickle-down effect of the better-than-expected economic growth. It is hard to expect such an effect because the growth has been heavily dependent on exports of a few items such as semiconductors which do little to create jobs.

More worrisome is that a large number of indebted households will inevitably face a decline in their disposable income as their debt payment burden will increase following last month’s interest rate hike. The household debt totaled 1,400 trillion won this year, and an additional rate hike may worsen the problem, having an adverse impact on the economy.

Needless to say, the best way of tackling this issue is to create jobs. But this is easier said than done. President Moon has repeatedly said that his top priority is to generate more jobs as part of his administration’s efforts to achieve a “people centered” economy and “income-led” growth. However, critics have called into question his policy as it has yet to make substantial progress.

The Moon administration should not be complacent about economic indicators and statistics which appear to be good but belie the true picture of people’s lives. The President and his policymakers need to make all-out efforts to promote inclusive growth for the people, particularly the poor and underprivileged.

 




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