Structural Stagnation
The Federation of Korean Industries recently carried out a survey with 38 economists, and announced on Nov. 25 that 44.7 percent of them picked secular stagnation, or structural long-term recession, as the keyword of the Korean economy next year. Secular stagnation can be defined as the continuation of a lack of demand and low growth, with investment reaching the limit.
Twenty-eight point nine percent of the respondents selected new normal, which means low growth, low interest, and low consumption being new standards in the wake of the global financial crisis. Ten point five percent chose the three-low phenomenon, that is, the simultaneous occurrence of low growth, low prices, and a weak yen. Seven point nine percent picked Japanization in which deflation, unemployment, and national debt increases take place at the same time.
Approximately 60 percent of the experts predicted that the Korean economy would show a U-shaped recovery for five years to come, while the others mentioned an L-shaped or W-shaped double dip. This implies that the Korean economy is less likely to show the resiliency witnessed in the past.
Twent-eight point nine percent of the survey participants answered that the government has to concentrate its support on the manufacturing sector in order to beat low growth as of late. Twenty-three point seven percent mentioned the income policy for helping households increase their consumption. Also, 39 percent and 15.8 percent of them noted that industrial structural change and corporate tax cuts are particularly important in industrial restructuring, respectively. Thirty-six point eight percent answered that the Bank of Korea should help address the household debt problem by means of monetary policy, while 34.3 percent said that Korean currency needs to be depreciated for anti-deflation efforts and higher export competitiveness.