[Editorial] To Escape the New Government's '0.8% Growth Rate'

The presidential election is five days away. In this election, held amid severe domestic demand slump and youth unemployment crisis, the future government has received the daunting indicator of '0.8% growth rate this year' today. The Bank of Korea has officially announced a low growth rate of 0% by forecasting a growth rate of 0.8% for this year.

The situation is painfully felt as the real economy is deteriorating, with the decline in growth rate, decrease in exports, and increase in financial insolvency. Depending on how flexibly and effectively the new government utilizes macroeconomic policies (monetary, exchange rate, fiscal) and financial policies, our economy will either escape the crisis or be engulfed by it.

The problem is that effective prescriptions are not coming from the mouths of the powerful presidential candidates. Instead, most of the pledges involve increasing the national debt by nearly 200%. According to the Policy Evaluation Institute, if Lee Jaemyung of the Democratic Party and Kim Moonsu of the People Power Party each implement their pledges, the national debt will surge by 202.5% and 199.9%, respectively, according to simulation results.

There is great concern that financial pledges centered on debt forgiveness are merely short-term patches. Candidate Lee Jaemyung has promised to implement everything from debt adjustment to forgiveness, beyond simple repayment deferral or extension, through a 'Comprehensive COVID-19 Loan Plan'. Candidate Kim Moonsu's expansion of the New Start Fund aims to purchase the loan bonds of small business owners and self-employed individuals with government funds, partially forgiving the principal or extending the repayment period and lowering interest rates.

The supply of loan funds and debt relief are only temporary measures and do not guarantee substantial recovery. Especially in a situation where national debt is rapidly increasing, bank support is inevitably needed to secure resources. Banks, for whom soundness management has become important due to rising delinquency rates, will eventually raise the threshold for loans.

Candidate Lee's pledge to reduce borrowers' interest burdens by adjusting the additional interest rate is the same. The pledge to reduce the burden of principal and interest repayment by excluding legal costs included in the additional interest rate may push low-credit individuals out of the primary financial sector. Banks, worried about declining profitability, may scrutinize loan reviews more strictly. Even if additional interest rates are suppressed, if the method of reducing preferential interest rates is used, the actual feeling of interest rate reduction is low, so the effectiveness is uncertain.

To prevent the pledge to revive the economy from spinning its wheels again, the new government must contemplate strategies for substantial growth through sustainable policies rather than simple patchwork prescriptions. We hope that the words 'government-controlled finance' and 'bank servitude' will not be heard in the new government.

zoom@fnnews.comzoom@fnnews.com Lee Jumi Reporter