[Editorial] Era of slow growth?

Both domestic and global financial institutions say Korea’s per capita GDP, which has remained in the doldrums since it broke through the $20,000 level in 2007, is now ready to reach another milestone in its growth trajectory ― $30,000 in three or four years.

But none should be deluded by this phenomenal growth projection for per capita GDP, denominated in the U.S. dollar, because it hardly means proportional growth in the Korean won-denominated family income. It is rather juxtaposed against an era of slow growth, which quite a few economists insist the Korean economy has entered.

In its recent report, the LG Economic Research Institute said per capita GDP, which stood at $22,424 in 2011, will grow to $29,000 in 2016 and surpass the $30,000 mark the next year. Fueling the growth will be the Korean currency’s rapid gain against the U.S. dollar, which the think tank assumes will be at an annual average rate of 5 percent.

The private think tank assumes economic growth, as measured in the Korean currency, will be much slower than per capita GDP growth ― at an annual average rate of 3 percent. It also assumes the consumer price index will rise at an annual average rate of 2 percent.

The Hyundai Research Institute has come up with similar per capita GDP projections. It says per capita GDP will reach the $30,000 level in 2016 or 2017, though it does not rule out the possibility that the breakthrough may be delayed by one or two years, depending on where the global economy is headed.

The projections by LG and Hyundai are little different from one by the International Monetary Fund, which said in October last year that Korea’s per capita GDP would rise to $31,825 in 2017.

It will be nothing short of extraordinary if per capita GDP grows 30 percent to 40 percent in five years, as forecast. Moreover, a convincing case can be made that such phenomenal growth reflects Korea’s economic prowess. Yet there is good reason that it cannot be welcomed wholeheartedly.

True, a strong won will benefit all Korean people as it will curb the prices of imports and, by doing so, help to stabilize consumer prices. It will also benefit people making frequent overseas trips and those sending money to their children studying abroad.

But the downside is that it will have a significant impact on the Korean economy, which heavily relies on exports to generate growth. Exports will slow when the Korean currency gains against the U.S. dollar. This is likely to be yet more painful if the Korean economy has already entered a long-term mode of slow growth, as claimed by phase economists.

On Friday, the Bank of Korea lowered its 2012 growth estimate from 2.1 percent to 2 percent, 1.3 percentage points lower than the world economic growth projection of 3.3 percent ― the largest growth gap between the Korean economy and the global economy in 14 years.

The 2013 growth outlook is a little better. Yet pessimism appears to be outweighing optimism, with the central bank having readjusted the outlook downward, from 3.2 percent last October to 2.8 percent on Friday. The central bank said recovery will be slower than expected, with both consumers and corporations tightening their spending and investment.

The downward readjustment follows an anemic performance in the recent past. President Lee Myung-bak, as a candidate five years ago, committed himself to generating growth at an annual average rate of 7 percent. But the actual growth rate was slightly below 3 percent, 2.9 percent to be exact, during the five years of his governance.

No wonder a growing number of economists are claiming Korea has already entered an era of slow growth. They warn it will be extremely difficult to generate growth at a rate of 4 percent or faster.

But an era of slow growth can hardly be a foregone conclusion for Korea, given that its economic prowess was reconfirmed when it came out of the 2008-09 Great Recession almost unscathed. The Korean economy will undoubtedly bounce back to renewed vitality if it succeeds in boosting growth potential by spending more on education, research and development and taking business-friendly measures.

Nothing provides a better opportunity to jump-start growth than the inauguration of President-elect Park Geun-hye’s administration next month. Her administration will have to serve as a rallying point for the nation’s renewed efforts for growth.