Rapid responseThe economy is showing dangerous signs of a major collapse. Exports in November and December fell 18.3 percent and 17.4 percent, respectively. Industrial output for November dropped 14 percent, the worst in 40 years. This double trouble in exports and in domestic production is something we didn’t experience even during the Asian financial crisis a decade ago.
Domestic corporations and financial firms are shuddering at what they fear will be a dismal January. Economic indices are expected to set new lows. Lee Seong-tae, governor of the Bank of Korea, predicted the nation’s growth, export and employment rates would suffer a great deal this year. And he isn’t alone in painting a gloomier picture for this year’s first half than the latter part of 2008.
The Korea International Trade Association forecasts that exports will nose-dive about 30 percent in January and will fall by a double-digit percentage over the first six months of the year. Given that exports account for nearly half of our gross domestic product, negative growth seems inevitable. Yesterday, the Grand National Party’s chief policy maker, Yim Tae-hee, uttered the dreaded “M” word - as in “minus growth” - for the first time.
Gone are the days when companies outside of Seoul were in worse shape than those in or near the capital, and small and medium businesses struggled more than large conglomerates. Even leading firms are in trouble. Samsung Electronics has been bleeding red since late last year. Posco is dealing with its worst performance in 40 years. Hyundai Motor has seen its U.S. sales slashed in half, and LG Display is staring at a loss.
Major economic research firms predict that Korea, with its heavy reliance on the global economy, would suffer a big blow during the international recession now under way. Increasingly, there are signs that such predictions will come about. If our economy collapses, it will drag down our growth engines and cause even graver problems.
Only twice has Korea had minus growth, in 1980 and 1998. Economies the world over are bracing themselves for huge deficits.
Our government also must be prepared to resort to a revised supplementary budget or more extreme measures to boost the economy.
An economic crisis needs a rapid response. And the administration and the ruling party must be at the forefront of all necessary efforts. Opposition parties must all make sure their political feuds don’t spill over to the economy. A quick and decisive pre-emptive response will help us deal with the crisis.