OECD report is welcome, but job recovery should come first
The Organization for Economic Cooperation and Development (OECD) revised its growth outlook for the Korean economy Tuesday to an annualized 3.3 percent, up from its December estimate of 2.8 percent. The Paris-based club of industrial economies also readjusted its 2021 growth forecast for the global economy to 5.6 percent from the earlier projection of 4.2 percent. It cited the positive effects of the COVID-19 vaccines rollout and concerted efforts of by policymakers in major countries as reasons for this optimism.
The OECD said the Korean economy is recovering faster than expected. More specifically, it pointed out that the country suffered relatively less thanks to the government's appropriate quarantine measures, forecasting the nation's economy will be able to return to pre-pandemic levels within this year due to the minimizing of COVID-19's amplitude. The interim report then advised the government to continue its efforts to bolster demand and expand employment to ensure a sustainable and inclusive recovery, stressing the need for swift and effective fiscal spending.
However, the OECD diagnosed the ongoing rise of raw material prices, including crude oil, and signs of inflation in the U.S. and other major economies as downside risks. It pointed to a set of risk factors such as a possible capital outflow resulting from a rise in U.S. government bond rates and growing inflationary pressure if the Korean currency loses its value. The economy has long been troubled by fear factors, including the seeming perpetuation of jobless growth, a business slump specter resulting from sluggish demand and snowballing household debt.
Most worrying is the possibility of a vicious cycle, in which the scarcity of decent jobs leads to mass unemployment that erodes disposable income, which in turn strangles both demand and production. This notwithstanding, the OECD's upward revision of the economy's growth outlook is welcome, indeed. However, it becomes meaningless if the reality fails to meet expectations. Most important of all is the efficient allocation of budget spending. The government has to do all it to place a top priority on job creation to turn this optimism into reality.
The Organization for Economic Cooperation and Development (OECD) revised its growth outlook for the Korean economy Tuesday to an annualized 3.3 percent, up from its December estimate of 2.8 percent. The Paris-based club of industrial economies also readjusted its 2021 growth forecast for the global economy to 5.6 percent from the earlier projection of 4.2 percent. It cited the positive effects of the COVID-19 vaccines rollout and concerted efforts of by policymakers in major countries as reasons for this optimism.
The OECD said the Korean economy is recovering faster than expected. More specifically, it pointed out that the country suffered relatively less thanks to the government's appropriate quarantine measures, forecasting the nation's economy will be able to return to pre-pandemic levels within this year due to the minimizing of COVID-19's amplitude. The interim report then advised the government to continue its efforts to bolster demand and expand employment to ensure a sustainable and inclusive recovery, stressing the need for swift and effective fiscal spending.
However, the OECD diagnosed the ongoing rise of raw material prices, including crude oil, and signs of inflation in the U.S. and other major economies as downside risks. It pointed to a set of risk factors such as a possible capital outflow resulting from a rise in U.S. government bond rates and growing inflationary pressure if the Korean currency loses its value. The economy has long been troubled by fear factors, including the seeming perpetuation of jobless growth, a business slump specter resulting from sluggish demand and snowballing household debt.
Most worrying is the possibility of a vicious cycle, in which the scarcity of decent jobs leads to mass unemployment that erodes disposable income, which in turn strangles both demand and production. This notwithstanding, the OECD's upward revision of the economy's growth outlook is welcome, indeed. However, it becomes meaningless if the reality fails to meet expectations. Most important of all is the efficient allocation of budget spending. The government has to do all it to place a top priority on job creation to turn this optimism into reality.
