Still fighting amid a crisis

When two waves meet, a pyramid-like shape is formed. The wave column can grow up to two to three times bigger to create a menacing form. If these waves are caused by a typhoon, they can immediately sink a boat.

Such awing triangular waves are looming closely toward the Korean economy as it faces the simultaneous three highs — in interest rates, consumer prices and exchange rates — that we have not experienced for decades.

The economy is shaking and volatile just like a ship on the brink of sinking. The wave of the U.S.-China trade war and the pandemic has been worsened by shockwaves from the Russia-Ukraine war and caused a sharp jump in interest and exchange rates, as well as prices in energy, grains, and other commodities. Such multiple whammies have not swept the world since the 1970s. The world now faces the risk of stagflation — a dangerous mix of high inflation and economic stagnation.

Such rapid development on the external economic front has raised alarms for the Korean economy reliant on exports and imports of fuel and commodities. If the past warnings had been the shepherd’s cry of wolf, today’s warnings are real. The ominous signs surfaced from December. On top of widening fiscal deficit, Korea incurred a trade deficit for two straight months in December and January and again in March and April.

The surge in energy import cost had landed hard on the trade balance. Competitiveness of semiconductors that has buttressed Korea’s exports and the economy is waning. Despite expansion in the foundry business, Samsung Electronics is falling further behind TSMC. Its stock price has stayed in the 60,000-won ($47) range as a result.

The economy is moving toward the lost decades of Japan. Fiscal health has been critically hurt by the government’s snowballing debt and income has become stagnated due to weakened competitiveness. The deficit streak in the trade balance is the evidence. Twin deficit spells serious trouble for Korea. Korea overcame the liquidity crisis in 1997 and 1998 through strong public finance. But government coffers can no longer provide comfort due to serious debt.

The outgoing and incoming administrations are clashing over a wide range of issues from the changes in the prosecutorial authority to the relocation of the presidential office. President-elect Yoon Suk-yeol’s administration that takes off on May 10 does not show reliable determination or capacity. The perilous economic climate has only begun. If the economy sinks, the people onboard will drown. Political circles must stop wrangling and become united to safeguard the country from tumultuous waves.