[Editorial] Lowest in economic growth
South Korea posted the lowest economic growth rate among 19 major economies in the first quarter.
The global economy is embroiled in unprecedented uncertainties caused by a tariff war that the US started and a renewed trade protectionism.
Slowed growth has become the reality of many major economies, but the nosedive of South Korea's growth rate is obviously a matter that Koreans should think hard.
According to the Bank of Korea, the Korean real gross domestic product -- a key measure of economic growth -- shrank by 0.246 percent in the January-March period from a quarter earlier.
It was unexpected negative growth. The central bank had forecast 0.2 percent growth.
To make matters worse, South Korea marked the weakest performance among the 19 major nations that have released their first-quarter growth figures, including the United States, Canada, France, Germany and China.
Like South Korea, the US economy took a step backward, but its negative growth of 0.069 percent was insignificant.
Though Japan and the United Kingdom have not disclosed their first-quarter growth numbers yet, theirs are expected to be better than Korea's.
A gloomy prospect of South Korea alone struggling in the global economy seems to loom.
The nation's growth appears structurally stagnant, considering it remained below 1 percent for four consecutive quarters from the second quarter of 2024.
The government expects the 13.8 trillion won ($9.87 billion) extra budget to boost the growth, but it will likely kick in from the second half, raising the annual growth rate by a mere 0.1 percentage point.
The reasons for its negative growth are various.
Exports -- which have propped up South Korea's economy -- have run into barriers in many markets. Efforts to discover and develop new industries that will lead Korea's growth have been insufficient. Some companies have moved out of the country for better investment conditions.
More critical is the stagnant domestic demand.
Consumers afflicted with high inflation and snowballing household debt can ill afford to open their wallets.
Under these dire conditions, the executive branch has been dealing with a leadership vacuum due to President Yoon Suk Yeol's Dec. 3 martial law declaration, impeachment and removal, while the Trump administration's tariffs have jolted the South Korean economy.
In a situation where South Korea's economic growth is facing major challenges, the upward trend of its national debt is overwhelming.
According to a recent report by the International Monetary Fund, South Korea's ratio of general government gross debt to GDP is projected to rise to 54.5 percent this year, exceeding the average ratio of 54.3 percent for 11 nonreserve currency countries classified as "advanced" by the IMF.
In 2016, South Korea's government debt-to-GDP ratio was 39.1 percent, way below the average of 47.4 percent for nonreserve currency countries.
The recent surge of the South Korean ratio was mostly driven by the rapid increase in government expenditures after the COVID-19 pandemic.
South Korea's government debt-to-GDP ratio is expected to approach 60 percent by 2030.
Politically motivated expenditures that only waste public finance should be eliminated. Measures to boost the Korean economy are urgent.
The presidential candidates should restrain themselves from making populist pledges.
A promise to revise the Grain Management Act to obligate the government to purchase overproduced rice unconditionally is one of them. Its revision bill was vetoed out of concerns that it would only drain government coffers.
Five economic lobby groups — the Korea Chamber of Commerce and Industry, the Korea Enterprises Federation, the Federation of Korean Industries, the Korea International Trade Association and the Federation of Middle Market Enterprises of Korea — on Monday proposed 100 policy proposals for the next government that deal with how to spur Korea's growth, develop new industries and expand Korea's economic territory, among others. The proposals are worth considering when drawing up election pledges.
The presidential candidates should stop competing over populist pledges and present realistic and effective ones to help the nation get relief from low growth and heavy government debt.
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[Aziz Huq] America's national security for sale
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[Editorial] Pricing power
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16 hours ago
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Partisan feuds intensify ahead of contentious bills
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