Korea’s growth rate in the fourth quarter of last year was the lowest among the Organization of Economic Cooperation and Development (OECD) member countries. According to the Ministry of Strategy and Finance (MOSF), in the fourth quarter, the average growth rate of the 30 OECD members was -1.5 percent compared with the previous quarter, but Korea recorded the lowest at -5.6 percent. The figure of -1.5 percent was the worst grade since the OECD was established in 1960. The Korean economic situation is thus illustrated to be very serious.
Experts said that this result shows Korea’s fatal flaw –Korea has depended on exports too much. Our nation is very easily swayed by the international economic condition. Korea’s dependence on trade, both imports and exports, reached 70 percent, which is abnormal compared to 30~40 percent averages in other countries.
The MOSF admitted that the current situation is worse than the 1997 financial crisis. The Ministry said: “The global economy was not bad in 1997, so we could survive by exporting products overseas. But nowadays, the economic crisis from America covers the whole world, and it made Korea the biggest victim.”
Experts thought encouraging domestic markets is very important to solve this problem. In this respect, the government made a very good move in encouraging the domestic market, such as the service market. However, it isn’t enough to be effective unless the government prepares new industrial policies as well. The country should find another policy, for example, the Chinese policy to provide subsidies to farmers to buy home appliances rather than a policy of providing coupons toward the poor to buy groceries. The Chinese policy can expand the electronics and IT markets, which are able to affect whole industries.
Especially, experts point out that the government should encourage electronics purchases that suffer from the global economic recession. This could strengthen the retail industry and create employment.
Korea has made up for insufficient domestic demand by finding the way to sell overseas with exports. Even though successive governments tried to revitalize domestic demand, it didn’t work. If Korea wants to obtain results, the government should encourage service markets such as education and medicine.
Moreover, the administration ought to make a self-perpetuating system such as the government making a revenue model by combining ideas and analyses about industrial systems, and the companies use the model and create benefits. Or some have suggested that it might be an efficient measure for the government to promote infrastructure projects.
