IMF's warning

Korea should boost corporate morale to prevent economy's fall

The International Monetary Fund (IMF) lowered its growth forecast for South Korea this year from 2.6 percent to 2 percent in its global economic outlook released Tuesday. The IMF also revised down Korea's gross domestic product (GDP) growth for next year to 2.2 percent from the 2.8 percent projected in its April report. The global financial body scaled back its GDP growth projections for the country by 0.6 percentage points for both this and next year in just six months.

The IMF also revised its global growth outlook for 2019 downward to 3 percent, the lowest level since 2009. In October last year, the Washington, D.C.-based monetary agency forecast the world economy would grow by 3.7 percent this year but has since lowered the projection four times ― to 3.5 percent in January, 3.3 percent in April, 3.2 percent in July and 3 percent this month. Amid such a global economic downturn, concern is mounting here that Korea's growth rate could even fall to the 1-percent range if the government fails to manage the economy properly.

As reasons for the downward revision of Korea's growth projection, the IMF cited the aggravating external environment that is raising the nation's downward risks. That is, Korea is being directly hit from the slowing growth in China and the "spillover" of the year-long trade war between the neighboring country and the United States. It pointed out that the ongoing tension between Seoul and Tokyo would also likely have considerable adverse effects on both economies.

This notwithstanding, government officials are busy making excuses, saying the IMF's gloomier outlook is not particularly harsh for Korea, and the Moon Jaein administration is doing relatively well by offsetting the slump in domestic demand with expansionary fiscal operations. There are clear limitations, however, to pushing up the growth rate through budgetary input. The main engine of economic growth is the private business sector. If the country fails to restore corporate vigor, Korea may receive its worst report card of growth in the the 1-percent range. All this stresses the need ― yet again ― for the government to come up with policies to boost corporate morale.