[EDITORIALS]Tune economy carefully

We believe that the government's decision to shift the direction of its macroeconomic policy has come at the right moment. The economy seems to have bottomed out in the third quarter of last year. Various economic indexes are clearly signaling a recovery. Consumption is still strong and exports appear set to rebound this month. Some experts say that the Korean economy will achieve double-digit growth in the second half.

But risks persist. If this trend continues, the inflation rate may exceed 6 percent, as price hikes gain momentum. Excessive liquidity, a result of the government's low interest-rate policy and local lenders' rush to increase household loans, is fueling steep rises in the price of stocks and real estate.

Considering these movements in the economic indicators, we believe now is the time to switch policy priority from growth to stability. So far, the government has employed microeconomic measures to cool down the domestic economy, including tax probes into property speculators, an upward readjustment in the standard home prices for tax assessment and curbing the surge in household loans. Some of those measures have worked, to a certain extent. But if the government is to cope with the changing economy, it should shift the direction of its macroeconomic policy and adjust its fiscal spending and interest rates.

But given the vulnerability and instability factors of the Korean economy, the government should fine-tune its economic policy machinery to control the speed of change in the business cycle, rather than adopting drastic measures or resorting to shock therapies.

We cannot be fully optimistic about the future of the Korean economy because companies' facility investments are still lagging. In addition, there are enormous uncertainties, including regional and presidential elections this year, the wavering U.S. economy, the crisis in the Japanese economy and surging international oil prices.

In the past, the government often caused volatility in the local economy by failing to implement proper economic measures at the right time and taking excessively tough action too late. This time, the government should carefully determine the weight of its measures so that it will not make such mistakes again.