[EDITORIALS]Don't neglect the economy

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[EDITORIALS]Don't neglect the economy

All is far from rosy on the economic front. As we float in the air excited about the World Cup finals, growing uncertainties are kicking up storms in the world's economy. The central focus of trouble seems to be South America and the United States.

The trouble in South America originated in Argentina and has spread to Brazil and Uruguay. But what concerns us more are signs of trouble in our biggest export market, the United States. Having expanded at 5.6 percent in the first quarter, the U.S. economy is projected to fall short of an earlier 3 percent forecast for the second quarter and grow by just around 2.5 percent. To reflect the pessimism, the retreat in the leading U.S. stock indexes, the Dow Jones Industrial Average and the Nasdaq Composite, is fast approaching the low recorded after Sept. 11.

A weakness in the U.S. dollar is also mounting. In international foreign exchange markets last weekend, the greenback fell to a seven-month low against the Japanese yen, and the lowest in more than two years against the euro. The dollar has not fared any better against the Korean won. The dollar recorded the lowest level against the won in 18 months, falling below 1,210 won. It is nearly a 9 percent drop in just two months from the year's high of 1,332 won recorded in April. A high won means a proportional increase in the price of Korean products in international markets, inevitably affecting our exports. The Korea International Trade Association is projecting a retreat in export growth this month from last month's 8 percent. Coupled with the loss of work time during the World Cup finals, and with time spent on local elections, the increase in exports is expected to remain below 4 percent.

It is not likely that these factors will turn around once the World Cup ends. The government and the central bank must read the trend of the international economy and absorb incoming shocks with appropriate adjustments in fiscal and monetary measures. Seoul must also take action to speed up remaining restructuring, including the treatment of Hynix Semiconductor, and to quell internal disruptions such as labor conflicts. The World Cup is a fine event, but we cannot neglect the economy just because of soccer.

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