Policymakers Advised to Take Back Seat

By Kim Tae-gyu

Staff Reporter

The government-spearheaded economic stimulus measures, which helped Korea rebound from the global economic crisis at one of the fastest paces in the world this year, should give way to market forces, according to a private think tank.

Samsung Economic Research Institute (SERI) said Wednesday that the private sector is required to take the upper hand so that Asia's fourth-largest economy will be able to continue its recovery.

"The Seoul administration took the right path in grappling with the unprecedented financial crisis. Thanks to its stimulus plans, Korea could rack up a fast rebound this year," SERI senior researcher Shin Chang-mock said.

"However, there was a downside, as the nation's private sector took a back seat. In order to keep recording growth, the visible hand is required to hand over stewardship to private firms," he said.

The visible hand refers to the mandate of the government compared to the mystical forces of the market, dubbed the invisible hand.

As Shin pointed out, the visible hand has played a pivotal role here in dealing with the protracted economic turmoil throughout this year because the invisible hand did not work properly.

The Lee Myung-bak administration is expected to spend 257.7 trillion won this year, up 17.2 percent from 2008. In addition, spending of the budget was frontloaded with 65 percent of it channeled in the first half.

The Bank of Korea (BOK) also cut its benchmark interest rate to a record low 2 percent early this year. The central bank did not surrender to the seamless requests of critics that the rate should be elevated to prevent inflationary pressure or asset price bubbles.

"The proactive fiscal spending is estimated to boost the economic growth rate by 1.5 percent. Plus, the low borrowing costs also helped the economy get back on track," Shin said.

"Yet, corporations are accustomed to following initiatives instead of carrying out their own strategies as amply demonstrated by the still lackluster facility investment and employment," he said.

voc200@koreatimes.co.kr