[EDITORIALS]Economic clouds gatheringWhile national enthusiasm rages for the Korean soccer team, uncertainty looms large in the world economy, triggered especially by the U.S. and Latin American economies.
The delayed recovery of the United States, our largest export market, is the biggest worry for Korea. Growth in the U.S. economy, 5.6 percent in the first quarter, is forecast to fall to about 2.5 percent in the second quarter, below the initially predicted 3 percent. The Dow Jones Industrial Average tumbled below 9,300 last week as investors were disappointed by the slow pace of economic recovery. The Nasdaq was barely over 1,440, approaching its low after the Sept. 11 terrorist attack.
The U.S. currency is fast losing value. On the international markets last weekend, the dollar was at a seven-month low against the Japanese yen and a 26-month low against the euro. The Korean won was also affected, and at the weekend, the dollar dipped to 1,219 won, the lowest since December 2000. Compared with the year's high of 1,332 won in April, the dollar has depreciated 8.5 percent in only two months.
Unfortunately, with the value of the won rising, so are the prices of the products that Korea exports. According to the Korea International Trade Association, export growth, which was almost 8 percent in May, will drop to about 3 percent in June, with additional adversities like the election holiday. There is little chance that the factors that hamper the world economy may magically improve after the World Cup ends this week. Which means that exports, on which the Korean economy relies heavily, will be at risk in the second half of the year.
The government and the Bank of Korea must find effective countermeasures. They have to administer macroeconomic factors such as finance, currency and exchange rates flexibly, based on fine analysis of world economic currents. They have to speed up the remaining economic restructuring, such as dealing with Hynix Semiconductor, and redouble efforts to resolve uncertainties in the domestic economy, such as labor disputes. If we want to keep the passion and exhilaration generated by the World Cup, we must prepare for economic rainy days.