Time for a longer-term strategy

The Korean economy has arrived at a cliff, and the latest economic data - production, consumption, investment and exports - all point to a free fall.

Sentiment indices have also turned decisively negative. According to the latest industrial activity data by Statistics Korea, manufacturing output fell 1.2 percent in January from the previous month after growing 1.3 percent in December. Capital investment plunged 6 percent in January month on month. Retail sales slipped 1.4 percent from December, and the factory operation rate stood at 72.6 percent, a level last seen during the global financial crisis in 2008.

Exports in February tumbled 12.2 percent to extend the longest-ever downward spiral for 14 consecutive months. The business sentiment index compiled by the Bank of Korea to reflect corporate outlook in the economy registered a seven-year low of 63. The consumer confidence index also slipped below 100 for the first time since last summer, when the country was swept up in a collective panic from the outbreak of Middle East respiratory syndrome, to represent negative outlook for the economy and individual income.

The government advanced first-half budgetary spending and revived the individual sales tax cut from February to prevent a further slowdown. But once the economy goes down, it is hard to reverse the trend. Domestic demand somewhat helped to sustain the economy last year, despite sagging exports. But since the economy is still heavily reliant on external trade, a prolonged slowdown in exports has begun to take its toll on the entire economy.

Exports must be revived. That cannot be helped through our efforts alone because external conditions are getting worse. Traditional industries like shipbuilding, offshore plants, automobiles and petrochemicals that make up the bulk of Korean exports are receding. Shipments to our biggest market have been sharply reduced as China orients itself more toward the service sector and localizes its manufacturing sector. But exports of consumer products like cosmetics, food and baby supplies have surged.

The industry must closely study individual markets and realign our export strategy to come up with a more customized and focused production and sale plan. An entirely new approach is needed in order to renew competitiveness. What we must come up with is a longer-term strategy to realign the industry and our economic structure.

JoongAng Ilbo, March 3, Page 34