South Korea’s economy grew by 0.6 percent in the third quarter of 2023, its third consecutive period of expansion. If the economy grows by 0.7 percent in the fourth quarter, the country will be able to hit the growth forecast of 1.4 percent in 2023. The growth rate, however, raises questions about what the government could have done more to boost the economy.

Since 2000, there have been only two years ? 2009 and 2020 ? when Korea recorded a growth rate below the 1.4 threshold. The economy was hit by a global financial crisis in 2009, followed by the Covid-19 pandemic in 2020.

The country has seen its fundamentals increasingly weaken, but its growth has been too slow to offset the hindrances. The Organization for Economic Cooperation and Development (OECD) recently estimated Korea’s potential growth rate to be less than 2 percent, suggesting that the economy’s growth will be limited to only 2 percent without price surges and its fundamentals are still too weak to support the 2 percent growth rate. Korea has not seen its growth rate surpass its potential forecast since 2012, and even if the economy grew by 1.4 percent this year, the actual growth falls much short of the OECD’s forecast of 1.9 percent.

Rather than focusing only on short-term stimulus injections, the Yoon Suk Yeol administration must eliminate underlying obstacles hindering economic growth and to that end, the values of liberalism should be placed at the core of economic policy.

The government should overhaul the labor market so that businesses have the freedom to build their desired workforce, which can lead to greater improvements in job creation. Greater freedom for business is also essential for consumption growth.

Restructuring insolvent companies is a necessary step towards a healthy economy by saving the government money that otherwise would have to be spent on support for productive businesses. It is unfair that funds meant for dynamic and productive enterprises are being funneled into the survival of insolvent companies, as this could not only hamper healthy enterprises from getting much needed funds but also hinders national growth.

The government should bear in mind that freedom is the only path to innovative growth.

By Editorial Team

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