[EDITORIALS]Hope is not enoughContrary to the administration’s assertion that the economy is on the road to full recovery this year, warning lights are blinking. Korea’s current account surplus narrowed sharply as exports, the economy’s growth engine, recently weakened. According to the Bank of Korea, the nation’s current account surplus in January was $140 million, a 75-percent drop from the December surplus. The current account surplus this January was only about half that of January 2005.
Although the central bank blamed the Lunar New Year holiday and the increased number of people traveling or studying aboard for the sharp contraction of the surplus, weaker exports played the major role. The won has appreciated against the U.S. dollar, dealing a heavy blow to export profitability, and higher international oil prices increased the nation’s import bill despite the weaker dollar.
If the trend continues, it would be difficult to expect exports to lead economic growth this year. The export steam is going out of the economy with the stronger won.
And the domestic economic recovery is far from vigorous. There was a short-lived upward blip at the beginning of the year, but not much since. Corporate investments in machinery and plants rose by only 0.2 percent in January, while consumer sales dropped nearly 4 percent from January 2005’s sales.
The business sentiment index for manufacturers last month was 81, the central bank said. A number below 100 indicates a gloomy outlook by industrialists and businessmen. The index fell six points from January’s figure, the first drop in seven months. The decline was across the board ― conglomerates, small and medium companies, exporters and producers for the domestic market all had a gloomier outlook. Exports and domestic consumption have to drive the economy, but domestic consumption has been limping along and now even exports, which kept the economy going last year almost single-handedly, are showing signs of distress.
There is no need to be too negative about this year’s economic performance based only on one month’s figures. But there are too many areas of uncertainty to shake off concerns about a stagnant economy with just blind optimism. We are not trying to force a sense of danger, but we are insisting that we should prepare for sluggish growth if it comes.
The economy cannot revive with empty assertions that the fundamentals are getting stronger because the government has refrained from shock treatment.