It’s panic time
Korea’s exports decreased by 18.5 percent in January year on year. That’s the steepest fall since August 2009, when our economy suffered seismic shocks from the global financial meltdown. Most of our mainstay export items - such as semiconductors, petrochemical products, steel and cellphones - were down in the first month of 2016. Our exports to all markets across the globe except the eurozone declined at an alarming rate.
More alarmingly, it wasn’t only the dollar amounts that fell but the export volume as well. In volume terms, January exports fell 5.3 percent, a gradual rebound from minus 9.4 percent in October. The declines stem from a complicated set of factors including reduced global demand, oversupply and price cuts from lower oil prices. Unless variables such as a strong U.S. dollar and slowing Chinese economy change, the crisis could be prolonged down the road. The government’s forecast that our exports will improve compared to last year will likely be off the mark. If the gloom continues, our economy may be heading into something of a perfect storm.
Nevertheless, no special measures aimed at pulling our economy from the quagmire are on the horizon. The International Monetary Fund and major global investment banks are lowering their growth prospects for the world economy in lockstep, including major economies. Under such circumstances, China and Japan are engaged in a heated competition to lower their currencies’ value to prop up their exports, sparking a potential global currency war. As a result, our government is losing the leverage available - involving manipulation of interest rates, financial and exchange rate policies - to combat against external shocks. Yet our financial authorities cannot resort to government subsidies or other types of export promotion as they once did. We cannot but ratchet up our competitiveness in global markets by reinforcing our economic fundamentals and innovation.
Bills to resuscitate our struggling economy have been pending in the National Assembly due to partisan battles between the ruling and opposition parties. Despite new Deputy Prime Minister for the Economy and Finance Minister Yoo Il-ho’s plea for support in passing four labor reform bills to put our economy back on track, the opposition camp vehemently opposes them. The government must go further to expedite the restructuring of our industries and the mercy killing of zombie companies. We wonder if it really knows how to overcome a crisis, much less turning crisis into opportunity.
JoongAng Ilbo, Feb. 2, Page 30