Differences between major economic crisis and current crisis and future prospects

Looking at the past cases of global economic crisis (Great Depression, Global Financial Crisis, etc.), it will take a considerable amount of time to recover to the pre-crisis. Corona 19 is also expected to have a significant impact on the global economy in the future, and in the case of Korea, economic fundamentals have already weakened considerably even before the crisis. The Korean economy, which has been weakened by policy experiments represented by income-led growth over the past few years, has continued to widen the GDP gap (real growth rate <potential growth rate). The market is showing a sharp rise and then plunge again due to favorable conditions such as liquidity supply. In addition, the corporate sector's sluggishness due to Corona 19 will continue considerably, and it will be difficult to recover as early as in the global financial crisis. In terms of the trade sector, a significant global trade slowdown is expected, and Korea's exports are expected to be significantly affected.

 

In sum, this crisis is likely to be longer and longer than the global financial crisis, and recovery will take a considerable period of time, and even after the end of Corona 19, the V-shaped recovery is expected to be difficult. In the end, there is no choice but to prepare for a long-term recession, and securing financial capacity is very important. It will not be easy to overcome the current crisis with one or two large-scale liquidity supply, and it is necessary to secure fiscal capacity through fiscal restructuring and to increase fiscal productivity through efficient management of fiscal finances. It is necessary to prevent damage to growth engines by excluding inefficient policies that impose taxes on productive areas and transfer resources to unproductive areas. In addition, efforts should be made to overcome the crisis through a drastic shift in policy stance and secure the engine to preoccupy the global market after the end of Corona 19. In particular, it should be noted that policy experiments such as a minimum wage increase, a corporate tax increase, and a reduction in working hours are the causes of failure to increase the productivity and competitiveness of the Korean economy.