Too soon for optimismA few of the nation’s economic indicators are showing signs of recovery. According to data issued by the National Statistical Office on Monday, production in the mining and manufacturing industries and consumer sales rose in February from a month earlier. In addition, the Bank of Korea and the private think tank Samsung Economic Research Institute released data showing that consumer confidence has shown marked improvement.
Previous reports had shown that the country’s trade balance and current account balance rebounded in February, posting a large surplus. This fueled speculation that the economy has bottomed out and is on its way to a smooth recovery.
We hope these predictions prove to be correct. However, we have made an entirely different assessment. We believe that the economy has not yet hit bottom and that the economic crisis will persist for some time. The same NSO reports indicate that production and sales of consumer goods dipped by a huge margin compared with the same period a year earlier. The slight increase in consumer confidence can largely be attributed to the fact that rumors of a “March crisis” turned out to be groundless.
What is truly worrisome is the current account balance. Though the account is in the black for now, which has mitigated fears of a foreign currency crisis, it is more important to note its component parts. Exports are on the decline and imports are shrinking quickly. The economy is in danger of contracting, which presents a big problem.
Another reason for our pessimism in the Korean economy is that the United States, the veritable epicenter of the financial crisis, is still at a loss as to how to resolve the related problems. The threat of bankruptcy of large companies such as General Motors and the continuing paralysis in the financial sector remain potential large-scale economic bombs. If the bombs explode, it will deal yet another massive blow to the real economy.
We will see the end of the recession tunnel only after solutions to these crucial issues are found.
At this point, it may be too soon for anyone to be talking of recovery. Too much optimism could send the wrong signals to the government and the political community, thus hampering the country’s efforts to overcome the economic crisis that is upon us.
The government must proceed with restructuring projects in the shipbuilding and marine transportation sectors as well as plans to inject public funds into banks.
Lawmakers must pass bills for a budget supplement to shore up the social safety net and bills dealing with irregular workers, real estate taxes and media reform.