Inflation and protests create economic storm
Anna Fifield in Seoul | Monday, 23 June 2008
Reviving South Korea's economy was Lee Myung-bak's number one priority when he became president in February.
But surging oil prices, spiralling inflation, sagging export demand and anaemic foreign investment have coincided with anti-government demonstrations and a series of strikes to create a perfect economic storm.
Although the protests and the strikes are waning - the number of candlebearers on the streets is diminishing and some striking truck drivers have reached settlements - economists are concerned about the knock-on effects of their actions.
"I'm concerned that these labour disputes will lead to high wage demands across the board," said Oh Suk-tae of Citibank, who expected the economy to expand by 4.2 per cent this year.
"Until now, labour disputes were usually about political matters but the truckers' strike is about income. That could contribute to the inflation spiral," he said.
Lim Ji-won, an economist at JP Morgan in Seoul, is worried that government looked rattled.
"They seem to be losing their confidence so the implications for the longer term are quite negative," she said. "Public sector reform, service sector deregulation - these all need strong political leadership."
In his televised apology last Thursday, Mr Lee vowed to slow the pace of privatisation if the public so demanded, and vowed that he would not sell the national water, gas or electricity into private hands.
But surging oil prices, spiralling inflation, sagging export demand and anaemic foreign investment have coincided with anti-government demonstrations and a series of strikes to create a perfect economic storm.
Although the protests and the strikes are waning - the number of candlebearers on the streets is diminishing and some striking truck drivers have reached settlements - economists are concerned about the knock-on effects of their actions.
"I'm concerned that these labour disputes will lead to high wage demands across the board," said Oh Suk-tae of Citibank, who expected the economy to expand by 4.2 per cent this year.
"Until now, labour disputes were usually about political matters but the truckers' strike is about income. That could contribute to the inflation spiral," he said.
Lim Ji-won, an economist at JP Morgan in Seoul, is worried that government looked rattled.
"They seem to be losing their confidence so the implications for the longer term are quite negative," she said. "Public sector reform, service sector deregulation - these all need strong political leadership."
In his televised apology last Thursday, Mr Lee vowed to slow the pace of privatisation if the public so demanded, and vowed that he would not sell the national water, gas or electricity into private hands.