[FORUM]Polish up the crystal ball again

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[FORUM]Polish up the crystal ball again

It was just about this time last year when I got out my crystal ball and looked at the Korean economy's fortune in the coming year, just as fortune-tellers on the street told passers-by what was in their stars.

At that time, I said that although the situation was not too pleasant, things would not get worse. I predicted that after July signs of improvements would be visible and that with a drop in interest rates, the stock and real estate markets would show some life.

The basic story line was that we would still have to worry about how to make a living.

I don't want to brag - ahem - but I must say I did a pretty good job. So, I thought, why not write another masterpiece of fortune-telling? I sense that this year, depending on whether a "U" or an "L" appears in my crystal ball, our country could move in two different directions.

What I mean to say is that our economy has already gone through the worst, or is currently passing through it, and recovery is on the horizon. It is just a matter of when and how fast the recovery will come.

Fired up by the low interest rate environment, skyrocketing real estate prices in the Gangnam area of Seoul have proven that a bundle of money is wandering around, waiting to be channeled into the real estate or stock markets. If we have it our way, the graph of our economic performance over last year and this year will show a U-shaped curve.

Exports will pick up, money will flow into the coffers of our companies and the stock market will have its ups and downs but trend upwards. Real estate prices will rise, but they will not overheat.

Consumer spending has been the recent impetus for our economy. We need a boost from exports in order to see increases in real incomes. Well-balanced domestic and foreign trade sectors are needed; otherwise, a big bubble is waiting to burst. We have an upcoming World Cup that might make a hotel owner happy but will not save the whole economy.

Banks are already thinking about cutting back on household loans, a sign that consumer spending has reached the limits of its capacity. Even in a super-low interest rate environment, companies are reluctant to invest before the elections, not knowing exactly what will come next. With these domestic uncertainties, it is time to look abroad.

Needless to say, the U.S. economy is the most important element in the world economy, but predictions about the U.S. economy are also mixed. The Americans, like us, are not certain whether their curve will trace a U or an L.

There are no high expectations for Japan, but we do not have to worry about a weak yen anymore. As the United States and China have shown us, other countries will not just stand by to let the yen slide at Japan's bidding.

Even with its new single currency, a recovery in Europe is going to take place later rather than sooner. The economy has gotten much bigger and it will take some time before member countries can devise proper policies. The euro is without doubt a good thing, but it will take time for the good effects to be felt.

China's market for our exports grew nicely last year and will do the same this year. We are lucky to have them as our neighbors.

The war on terror will continue its course, but there will be no full-scale war. No one but Osama bin Laden wants one, but there will be some incidents.

Nobody knows where the upcoming mid-term elections in the United States or the Korean presidential election are heading. I would say that North Korea is a variable here. I hope our presidential candidates realize that with all the glory and prestige of that position comes a heavy burden. The chosen one needs a healthy dose of luck as well, if he hopes to conquer all the problems ahead.

A new round of trade negotiations that will open our agricultural, medical, legal, and educational markets is part of the homework for our new government, and our pension system problem is just waiting to explode.

While the wheels of the world economy have already begun to turn in a new direction, our economy is awaiting its new captain who will navigate our country through these new waters. Will he guide us in the right direction?


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The writer is the chief economic news editor of the JoongAng Ilbo.

by Kim Su-gil

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