Researcher advises caution toward U.S.

While the U.S. economy is showing signs of improvement, a researcher at Korea’s leading research institute warned Korean businesses to be wary of an overly bullish outlook.

“Although the U.S. economy is in relatively good condition compared to Europe and other developed economies, its basis for recovery is still weak,” said Park Hyun-soo of Samsung Economic Research Institute at a seminar yesterday on how Korean companies should respond to U.S., China and Japan economic policies. The event was hosted by the Korea Chamber of Commerce and Industry. “U.S. house prices and sales have gradually increased since February last year, and this has increased hopes for economic recovery, but the pace of the housing recovery remains slow. Although the U.S. unemployment rate is at the lowest level since the financial crisis, it remains high.”

Congress is scheduled to debate raising the country’s debt ceiling on May 18, and Park said this adds uncertainty and believes it won’t be easy for the two sides to reach a compromise because they have such different economic philosophies.

Although protectionism has been eased due to the Group of 20 Summit and increased surveillance by the World Trade Organization, Park suggested protectionism could be revived.

“Korean businesses may face additional trade pressure as the U.S. trade deficit with Korea increased 48.6 percent since the free trade agreement took effect last March,” Park said.

In regard to economic policy changes under Xi Jinping, Lee Moon-hyung, a chief researcher at the Korea Institute for Industrial Economics and Trade, noted China is entering a period of lower growth and industrial restructuring.

“The Chinese government is shifting its growth engine to domestic-oriented business and away from exports,” Lee said. “Given that Korean companies’ market share of exports to China is dwindling, they should remap their direction toward entering the service sector and improving their presence in the Chinese market.”

The Chinese government wants to nurture automobile, housing and electronics industries in its midwestern region, and Lee said Korean companies should actively seek to expand in the region.

Lee Ji-pyung, a researcher at LG Economic Research Institute, said Abenomics is negatively affecting Korean companies.

He raised concerns that a weak Japanese yen triggered by Abenomics’ indefinite quantitative easing is a huge burden to Korean exporters and urged them to develop strategies to deal with decreasing competitiveness.

By Kim Mi-ju [mijukim@joongang.co.kr]