Korea’s ex-president’s remarks on economy raise controversy

2023.09.21 14:05:01 | 2023.09.21 15:10:46

[Photo by Yonhap]이미지 확대

[Photo by Yonhap]

The South Korean government under President Yoon Suk Yeol faces a clash with the former administration led by Moon Jae-in over economic performance, spurring public confusion.

The controversy began when Moon dealt a blow to the current government policies in his first official appearance since leaving the office.

“Korea’s per capita income increased the most during the Kim Dae-jung, Roh Moo-hyun, and Moon Jae-in administrations,” Moon said. “The Roh government ushered in the $20,000 era and Moon $30,000.”

The former president said that the gross national income (GNI) per capita, inflation, stock index, exports, foreign direct investment (FDI), and fiscal conditions were in better shape during his administration than now.

To verify this claim, Maeil Business Newspaper and the Federation of Korean Industries analyzed key economic indicators for each of the eight administrations since the constitutional change to a direct democracy in 1987.

In terms of consumer prices, stock market returns, and FDI, the Moon administration’s numbers are better than those of the incumbent administration when compared at face value.

However, export growth showed to be much higher under Yoon and the exchange rate impact of intense U.S. austerity cannot be ignored in comparing GNI per capita. The credit default swap (CDS) index was also claimed to be the lowest under Moon, but the figure under Yoon has fallen to three quarters of the last day of the Moon administration.

Inflation averaged 1.2 percent per year between 2017 and 2021 under Moon, lower than that under Yoon of 5.1 percent in 2022.

This is largely attributed to the fact that Yoon took office while inflation was at its highest level in 24 years after the 1998 foreign exchange crisis as commodity prices soared in the wake of the global supply chain disruption last year.

The benchmark Kospi rose at an average annual rate of 4.8 percent over the five years during the Moon administration, higher than 24.9 percent in 2022.

Such a rise came on the borrowing to invest craze, sparked by record-low base rates aimed at stimulating the economy during the pandemic, which drove funds to the asset market.

However, the record-breaking debt investment had the adverse effect of increasing apartment prices across the country by an average of 11.9 percent annually during the five years of the Moon administration.

In particular, the ratio of household debt to gross domestic product (GDP) increased 18.1 percentage points to record 105.4 percent from 87.3 percent during the Moon administration.

FDI growth was also higher under Moon at 7.9 percent than under Yoon at minus 3.0 percent. Outbound direct investment (ODI) by Korean companies was also higher under Moon at 14.1 percent, compared with 5.5 percent under Yoon.

Exports, meanwhile, grew at a higher rate under Yoon at 6.1 percent than under Moon at 2.9.

GNI per capita performance can be also controversial as it can be evaluated differently depending on the timeframe. The average annual growth rate was higher for Yoon’s government at minus 7.4 percent, compared with 2.9 percent of Moon’s. The strong dollar since the second half of last year weakened the won and reduced income in dollars.

National income gained 19 percent during the Lee Myung-bak administration, higher than 11 percent of the Moon administration, contrary to Moon’s claim that the largest increase occurred during the Kim, Roh, and Moon administrations.

Economic experts say that it does not make sense to assess the performance of specific indicators for a specific period as macroeconomic indicators are complexly intertwined with each other.

“It is hard to understand how economic performance can be evaluated solely based on simple statistics,” said Kim Jung-sik, a professor at Yonsei University’s School of Economics.

Analysts also note that a one-to-one comparison is hard to be made between the single year of 2022, for which Yoon’s government was evaluated, and the five years of Moon’s administration.

By Kim Jung-hwan and Choi Jieun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]