[EDITORIALS]Driving toward deficitsThe current account deficit we have long worried would happen has finally become a reality. The current account deficit for the first quarter surpassed $1 billion. The effects of the falling won-dollar exchange rate and skyrocketing international oil prices are finally being translated into hard figures. Even if we took into consideration the Bank of Korea’s explanation that seasonal factors such as the increase of foreign dividends had a major influence, the deficit is extraordinarily high. The prediction of a $16 billion current account surplus no longer seems valid. In a worst-case scenario, it would be hard to make sure that the balance of current accounts for the entire year would not sink into a deficit.
At this rate, alarm bells should be ringing. In the United States, President George Bush ordered a temporary halt to deposits to the nation’s strategic oil reserve in response to rising prices. With more Americans using mass transportation rather than driving, the number of passengers on buses and subways is hitting a record high. Japan is also seeing the fruits of its long-term energy plan. By expanding the supply of hybrid cars, which have engines which run on both gasoline and electricity, sales of gasoline in Japan have gone down for the first time in 21 years.
On the day President Bush announced his emergency plan, the economy policy secretary at the Blue House was trying to reassure the public of the Korean economy’s stable growth. He announced that the current administration has managed the economy “based on principles and justice, which has changed the characteristics of the economy from a tin pot to an iron cauldron.” We wish we could share his confidence, disregarding statements that leading economy countries are making as “exaggerations”.
For the past three years, the won has been appreciating two to four times faster than the Japanese or Taiwanese currencies. Korea’s dependency on exports is about three times that of Japan’s. Korea also receives 82 percent of its payments for exported goods in dollars, while that rate for Japan is only 52 percent. Moreover, Korea imports 97 percent of its energy. Logically, Korea would be hardest hit by a staggering foreign exchange rate and high oil prices.
Who could easily believe their claims, which differ greatly from the lessons of global economics and even common sense? The people are worried. We ask the authorities of economic policy to appreciate that we are in a crisis. If the economy is okay, what is this economic crisis?