[Editorial] Government Pushes for a Double Crisis of People’s Livelihood and National Finance

The state-run think tank Korea Development Institute (KDI) warned of a double crisis of the people’s livelihood and the national economy in its “Economic Trend Report” two days earlier, stating, “Amid unstable sentiments of economic factors including corporations and households, the state financial deficit is further increasing.” It points to the fact that the growth rate recorded a mere 3.0 percent despite the government’s expenditure of 100.8 trillion won, or 60 percent of the annual budget execution plan, during the first half of this year alone.

The consolidated fiscal balance stood at a deficit of 10.4 trillion won from this January to April. Last year saw a surplus of 4.8 trillion won. The national tax revenue this year has underperformed while spending has increased with early execution of the budget. In the second half, the deficit amount is expected to rise further as supplementary budget will be set up to make up for the tax revenue shortage. This will inevitably add to people’s tax burden.

The National Statistical Office announced that consumer expectation index in July fell by 0.2 points from 95.4 last month to 95.2, continuing the downward trend for four consecutive months. This implies a poorer livelihood condition of citizens. Indeed, average monthly income per household nationwide dropped from 2.93 million won in the first quarter to 2.85 million won in the second quarter. Consumption expenditure also went down from 2.12 million won to 1.94 million won.

The incumbent government’s commitment to recognizing and overcoming the financial crisis can not be found anywhere. President Roh Moo-hyun said in the National Economic Advisory Council last month, “The potential growth rate will gradually recover, and the participatory government by no means will allow an economic bubble.” The KDI, however, reported a lowered estimate of potential growth rate from the previous 4.0 percent to 3.8 percent.

Kim Joong-soo, the former head of KDI who served for three years from August 2002, expressed his views on the cause for the falling potential growth rate in his farewell speech on August 5, saying, “What Korean society urgently needs is to move forward to become a global economy beyond the ideological dispute over growth or distribution.” Albeit belatedly, the government and ruling party must humbly accept the “interim economic assessment of the participatory government.”