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| President Moon Jae-in speaks during a meeting with senior secretaries at Cheong Wa Dae, Monday. Yonhap |
By Lee Min-hyung
The government is being urged to drop its "blind optimism" regarding a near-term economic rebound for the country, as this will end up undermining public trust toward policies amid lingering COVID-19 related uncertainties, experts said Thursday.
Such a view comes at a time when President Moon Jae-in and his administration are bragging about the outcomes of their efforts to curb economic damage from the global spread of the coronavirus. President Moon recently said the local economy has yielded "miraculous results" in terms of defending against the coronavirus-induced fallout in the first half of the year
The President also expects the economy to bounce back from the third quarter after hitting bottom in the second, citing a series of economic indices showing signs of a rebound.
Finance Minister Hong Nam-ki has also backed up the claim, saying the economy will be on a similar track toward recovery in the third quarter as the Chinese economy. China's GDP growth reached 3.2 percent in the second quarter after hitting bottom with a contraction of 6.8 percent in the first.
Economists, however, remain pessimistic over the administration's confidence, saying the chances are very slim for the real economy to recover from the coronavirus shock no later than the end of the year.
"Despite the government's optimism, the people are not feeling any actual signs of an economic recovery," Yonsei University economist Sung Tae-yoon said. The public will feel more and more disappointed by the government's economic policies if the President and the financial authorities keep underlining a few positive economic indices without commenting on the negative factors, according to the professor.
"This will also end up weakening the credibility of its policies," he said. "If the economic outlook remains promising enough to achieve such a short-term rebound, the government will drop pump-priming measures introduced to minimize the economic damage from the virus, but this is not the case for now, which is in contrast to the government's outward confidence."
The economy appears to be on track for recovery in the latter half of the year due to the statistical base effect, he said.
"The global economy suffered major shocks from the unexpected virus outbreak in the first half of the year, so indices in the second half of the year look to be better than those from the first half. But this does not mean that the economy has achieved an actual rebound."
Noh San-ha, another economist at the Korea Capital Market Institute, also shared a similar view, saying it is de facto impossible to predict whether the economy will recover in the latter half of the year.
"The government's optimism apparently comes in consideration of the base effect," he said. "But this has little to do with an actual economic recovery. Uncertainties surrounding the virus remain in place for now, so it is tough to predict whether the economy will bounce back in a short period of time."
"When uncertainties are cleared away and consumer confidence returns, the economy may be able to report outstanding growth, but this is nothing more than a best-case scenario," he said. "We still need to wait and see whether the virus spread will come to an end here and abroad."
Bank of Korea (BOK) Governor Lee Ju-yeol also did not express confidence in a potential economic rebound this year.
"The coronavirus spread has been accelerating in July, and pessimistic scenarios surrounding the virus are being rekindled as it shows no signs of subsiding," Lee said in a recent monetary policy board meeting.
"The local economy remains in an uncertain situation as no one can say for sure when the crisis will end, so we have to continue monetary easing policies," he said.
