"First 'Triple Crisis' Occurs Since the 2008 Financial Crisis"

Q2 This Year 'Triple (Consumption·Investment·Export) Crisis'
"Government Provoked Crisis by Reducing Consumption and Spending"

An analysis revealed that in the second quarter of this year, South Korea experienced simultaneous declines in consumption, investment, and exports for the first time since the 2008 global financial crisis. It is suggested that the reduced fiscal role of the government during the economic crisis accelerated the 'triple crisis (decline in consumption, investment, and exports)'.

On the 18th, the Nara Sallim Research Institute pointed out in a report titled "Analysis of Changes in Private Consumption, Government Consumption, Private Investment, and Government Investment Since 2008" that the triple crisis occurred for the first time in 15 years.

In fact, in the second quarter of this year, consumption (-0.7%), investment (-0.1%), and exports (-0.9%) all decreased. Looking at past cases, such simultaneous declines were only seen in the fourth quarter of 2008 with consumption (-2.4%), investment (-3.8%), and exports (-4.3%).

Lee Sang-min, senior research fellow at the Nara Sallim Research Institute and author of the report, stated, "A year in which consumption decreased compared to the previous quarter is an unprecedented situation that practically did not exist except during the financial crisis and COVID-19," adding, "Excluding the financial crisis and COVID-19 social distancing situations, a quarter-on-quarter decrease in consumption is an extremely unusual event occurring for the first time."

Moreover, when consumption, investment, and exports all declined in 2008, government consumption and government investment increased, offsetting the decreases in private consumption and private investment. However, this time, with the implementation of austerity fiscal policies, it is pointed out that the triple crisis was effectively self-inflicted. In 2008, when private consumption decreased by 3.8%, government consumption increased by 2.8%, limiting the overall consumption decline to -2.4%. Similarly, when private investment decreased by 4.9%, government investment increased by 1.6%, supporting the overall investment decline at 3.8%.

The senior research fellow explained, "This year, private consumption decreased by only -0.1%, but because government consumption decreased by as much as -2.1%, total consumption recorded -0.7%. In the case of investment, private investment rose by 0.1%, but government investment decreased by -1.3%, resulting in an overall investment decline of -0.1%."

He continued, "When tax revenues decrease due to economic slowdown, the principle is to reduce economic fluctuations through increased government spending," and argued, "It is necessary to harmonize not only the value of 'fiscal soundness' but also the value of fiscal responsibility."

This content was produced with the assistance of AI translation services.