[Editorial] Another gloomy year

Many will now have to grapple with a harsh reality as the New Year euphoria recedes. They include college seniors who, set to graduate next month, have yet to land jobs, and urban tenants, many of whom will find that their rent has risen beyond their means when they renegotiate their contracts ahead of the spring moving season.

According to an estimate by President Lee Myung-bak’s administration, the number of new job openings will decline from 440,000 last year to 320,000 this year. College students being recruited upon graduation are so few and far between that a decent job opening, when made public, invites a deluge of applications. The student union leader of a renowned Seoul university told a news outlet that many of his generation find that they cannot dream of being better off than their parents who had to start from scratch.

No less hard-pressed are urban tenants, those residing in Seoul’s metropolitan area in particular, who will have to renew lease agreements or move out to less expensive homes this year. It is an anomaly that tenants pay more to rent homes when the property market is depressed.

Rent is rising because families that can afford to buy homes delay purchases in anticipation that property prices, sharply reduced in the past several years, will drop further. Also jacking up the rent is a decline in the provision of new homes in Seoul’s metropolitan area this year to 87,000 ― the smallest number since 1992, according to an estimate by Woori Investment and Securities.

The brokerage house says it expects rent to soar in the metropolitan region in spring, with 680,000 homes up for lease renewal in the first half of this year.

Households will be worse off this year than in 2012. True, the consumer price increase would not be too onerous if it is arrested within the administration’s projection. The consumer price index, estimated to have been at 2.2 percent last year, is projected to rise to 2.7 percent this year.

However, the administration’s price policy is nothing short of absurd. It is planning to raise utility bills and other prices that are under its control while vowing to deal sternly with any move to raise the prices of daily necessities.

The projected consumer price index, modest as it may be, will still be painfully felt if the household income remains stagnant as projected. No wonder prices are of the greatest concern to households, given the prospects for slow growth. According to a recent survey, 57.1 percent of the respondents believe top priority in economic policy should be given to price stability.

The administration has recently revised its 2013 growth forecast from 4 percent to 3 percent. Still, some economic think tanks believe the administration is unwarrantedly optimistic, given that few economic conditions have improved in recent years.

It may be worth recalling what the administration said in late 2011. At that time, it said growth would be at 4.5 percent last year. But actual growth more than halved to 2.1 percent in 2012.

When growth was anemic in early 2012, the administration said it would pick up in the second half. But the quarterly growth rate has remained well below 1 percent for the past seven consecutive quarters.

Now the administration says this trend will continue into the first and second quarters of this year. No wonder, the administration is planning to frontload its spending, aiming at breathing growth momentum into the flaccid economy. Despite these efforts, it does not rule out the possibility of growth falling below the 3 percent level this year.

The prospects for slow growth and a decline in job openings, which will undoubtedly be a heavy burden on President-elect Park Geun-hye, give rise to speculation that one of the first tasks for her incoming administration will be to write a supplementary budget. But the downside will be a yawning budget deficit.

No one can have their cake and eat it. But an early return to fiscal prudence cannot be emphasized too much. Should Park decide to go for more spending, she will have to come up with a concrete schedule for returning to budgetary balance.