South Korean dreams fade as economy and president struggle
It took three years and acceptance of a sharp wage cut for machinery repair engineer Choi In-chan, 52, to find a job earlier this year.
Like many baby boomers who enjoyed South Korea's heady growth years, Choi has been doubly squeezed by the country's recent economic malaise: not only is he unprepared as retirement looms, but his adult son is unable to find a full-time job. Predicaments like Choi's are what prompted President Park Geunhye to acknowledge on Thursday that "major surgery" is needed to fix "chronic and structural problems" in Asia's fourthlargest economy. Having come to office in 2013 with promises to ease the economy's reliance on exports and the grip of its huge conglomerates, Park is now near the mid-point of her five-year term and has thus far managed neither. "It's a pity. This country has missed chance after chance," said Choi, who lives in a working class area of Seoul.
"It has been the same, government after government. There was all talk at the start of a government and then everything was so quickly ignored and forgotten." Government responses to two crises it has faced - the sinking of the Sewol ferry last year and this summer's outbreak of Middle East Respiratory Syndrome - were seen as slow and inadequate, and exacted a heavy toll on both the economy and Park's political capital.
While Park is not to blame for global economic headwinds, critics say her policy failings have exacerbated their impact: a lack of meaningful fiscal stimulus to reinforce interest rate cuts despite healthy public finances, little follow-up on reform promises, and overly optimistic economic assessments. Growth is by some estimates on track to drop to 2.5 percent this year, which would be the third- worst performance since the 1997/98 Asian financial crisis, from 3.3 percent last year. The market's consensus forecast is for 2.8 percent growth.
"People just feel at a loss for a sense of where the government wants to push the economy," said Oh Suk-tae, econo- mist at Societe Generale in Seoul.
South Korea's single-term presidency and Park's low popularity make it hard for her to drive reforms. She has called for a "creative economy" to spur innovation and the growth of small and mediumsized businesses, in a drive to diversify the economy and wean it off its reliance on exports. But the country's giant familyrun conglomerates, or chaebol, are as dominant as ever. It took a year from Park's inauguration for her government to unveil its economic goals, which included lifting employment and personal incomes, and containing heavy and growing household debt. On the first two goals, progress has lagged the targets, while household debt has grown.
Park's approval rating has fallen below 40 percent, from as high as 61 percent in mid-2013. Critics say she failed to take advantage of a near-record current account surplus to do more to stimulate the economy as high household debt suppressed spending, which, along with sluggish exports, has in turn deterred corporate spending. "We don't see the same boldness that South Korea used to deliver in the past. For example, the seven rate cuts - four in the last 12 months - have not been enough to lift the fog of gloom," said Waiho Leong, economist at Barclays in Singapore.
One of the biggest challenges is unfavourable demographics. The workingage population will start shrinking from 2017 and industries that made South Korea an export powerhouse, from electronics and cars to shipbuilding and chemicals, are faced with weakened demand and challenges from China and Japan. Poverty among the elderly is already the highest in the 34-nation Organisation of Economic Co-operation and Development (OECD), and those born in the decade following the 1950-53 Korean War are on a similar track. A survey by a public research agency last year found 70 percent of those in their 50s were financially unprepared for retirement. At the same time, youth unemployment is near a record high despite Koreans investing heavily in university educations, with a rigid two-tiered labour system making it harder for graduates to secure a career position. -