By Lee Chi-dong
Staff Reporter

The specter of a triple-dip recession is beginning to loom over the economy, as its fragile recovery is overshadowed by various challenges including the cash flow crunch at credit card firms and the national political slush fund scandal.

Under a triple-dip recession, gross domestic product growth will slide back into the negative after two or three rounds of brief positive signs.

The economy, which is in the first recession since the 1997 economic crisis, has suffered from a horde of whammies throughout this tumultuous year.

In the first half of the year, the economy was hit hard by the SK Global accounting scandal and a succession of major labor strikes.

Typhoon Maemi and automobile union walkouts followed suit, dealing yet another blow to the beleagured economy in September.

Policymakers managed to tide over the ordeals with the help of the government’s stimulus measures of interest rate cuts and a supplementary budget.

Currently, the market’s general perception is that an economic recovery has begun in earnest, although the indications are not enough to declare the recession over yet.

The International Monetary Fund also diagnosed the economy as having entered an early but fragile stage on the recovery track, recommending further relaxation in fiscal policy.

Yet some economists don’t rule out the possibility that the recent positive signs are nothing more than a temporary bounce brought on by the stimulus measures and robust exports.

They say another alarm will sound soon, judging by the instability of the financial market and prolonged sluggishness in domestic investment.

Under a worst-case scenario, Asia’s third-largest economy will be drawn into the abyss of a drawn-out recession, hardcore skeptics warned.

``It is true that stopgap measures and recent recovery signs have belied underlying weakness in the economy, as shown in the case of the credit card industry,’’ Shin Min-young, an economist at the LG Economic Research Institute said.

The concerns about a slow economic recovery are based on an unstable financial market, political uncertainties and other structural problems, he said.

A sense of crisis is hanging over the financial market, with leading credit card firms exposed to cash flow problems.

Questions are being raised over how much longer interim financial support will be able to prevent the time bomb from going off.

Business leaders also remain squeamish about investment, as prosecutors are widening their high-profile probe into allegations that major conglomerates provided huge slush funds to political parties during last year’s presidential campaign.

``It would be hard to expect exports to spearhead an upturn in domestic consumption and investment should the conditions persist,’’ Shin said.

He also pointed out that the Korean economy might undergo a jobless recovery, with the speed of its recovery far lagging that of global economies.

However, officials at the Ministry of Finance and Finance (MOFE) say it is too early to worry about a triple dip, even if all possibilities are open to the economy.

``Few economies have experienced a triple dip so far,’’ Kang Ho-in, an MOFE director said. ``Furthermore, the challenges surrounding the Korean economy are not new. Their impact will not be strong enough to hamper the recovery.’’

The hardships of credit card firms are mainly attributable to, not structural problems, but liquidity ones, he added.

Park Jae-ha, an economist from the Korea Institute of Finance (KIF), echoed the view.

``Consumption will likely return to a full recovery track in the latter half of next year,’’ he said. ``Until then, stronger growth in exports will continue to underpin the economy.’’

``I don’t think the current problems including those of credit card firms and the slush fund scandal will remain serious for long,’’ Park stressed.

He said that KIF’s 5.8 percent growth forecast for the Korean economy next year can be conservative in a sense, given improving economic conditions both at home and abroad.

The timing of a recovery in consumption and resolution of political uncertainties hold the key to a full-fledged economic take off, Park added.

lcd@koreatimes.co.kr