[EDITORIALS]Take care of the economyNowadays, the Korean economy is flying with only one wing. It has persisted in moving that way as the other wing ― domestic consumption ― remains folded. Thanks to stronger than expected exports, the economic growth rate for the first half is estimated at 5.4 percent, a little higher than an earlier forecast. During the second half, however, it is anticipated that the movement of the active wing will grow dull due to sluggish export growth.
Last month, the Bank of Korea lowered its forecast for growth in the second half from 5.6 percent to 5 percent, as the bank anticipated that the export growth would slow down.
The United States and other advanced countries expect that exports to China will not expand as much as in the first half because the Chinese economy is slowing. July’s business survey index, announced by the Bank of Korea yesterday, showed that export businesses felt that the market had already started to decline. Last month, the business survey index of export businesses was 74, much lower than June’s 85. When the index is below 100, the number of businesses that see the prospects for the economy as bad is larger than those who see it as good.
Another negative for the economy is the rising oil price. The international market price of crude oil is rising higher than the government expected. The government anticipated that the oil price would remain under $30 per barrel this year, and it drafted its economic plan based on that price. But due to the unstable Middle East situation, coupled with worries over sluggish oil production from Russian oil fields, the price of crude is over $40 per barrel now. The burden of high oil prices has started to appear in rising commodity prices. Last month, consumer prices were 4.4 percent higher than a year earlier, the highest rate in 16 months.
While consumption and investment do not show signs of a revival, consumer prices are rising because of the high oil price. If the growth of exports, which sustained the Korean economy so far, slows down, the Korean economy will be in total crisis. It is time to prepare a contingency plan taking the worst situation into consideration. Despite such a serious situation, the government has not made any move. The ruling party only indulges in a political struggle. While business activity shrinks and people’s lives get more difficult day by day, it is hard to find someone taking care of the economy, which is the most important thing.