A perfect storm is coming

Exports have fallen against a year ago period for the first time in October, causing the trade balance to extend a deficit streak for the seventh straight month. The red run is the longest in 25 years since the Asian financial crisis in 1997.

According to October trade data released by the Ministry of Trade, Industry and Energy on Monday, export dipped 5.7 percent on year to $52.48 billion. That is the first on-year fall in exports since the 3.9 percent retreat in October 2020 amid the global pandemic. Imports increased 9.9 percent to $59.18 billion, generating a $6.7 billion deficit in October.

Factors are complex. The protracted Russia-Ukraine war and the tightening trend after loose monetary policies to fight the pandemic have slowed the global economy. Robust exports of automobiles (up 28.5 percent) and batteries (16.7 percent) helped offset some of the deficit.

The Korean economy is looking at a perfect storm. Household debt outsizing the gross domestic product, steep rises in interest rates, and the Korean won value sinking to its weakest against the U.S. dollar since the global financial crisis have been hardening consumers and companies.

The U.S. Federal Reserve is widely expected to raise the key rate by another 75 basis points this week. To keep the gap between the two benchmark rates at manageable levels, the Korean central bank also would have to raise the rate later this month.

The outlook for the chip industry, which has been the pillar to Korea’s exports and economy, has turned grim. Memory chip prices are plunging due to shriveled demand and constrained exports to China due to U.S. regulations. Politicians, however, are negligent to the danger. A bill aimed at strengthening the chip industry competitiveness — proposed by independent lawmaker Yang Hyang-ja after she headed the National Assembly special committee on chips —still remains idled. The legislative Committee of Finance and Economy has not even formed a subcommittee to discuss tax incentives for chip investment. Proposed spending to support the chip industry in the 2023 budgetary outline has been even denied or scaled back.

South Korea recovered from an international bailout after the liquidity crisis in 1997 with individual citizens donating their gold. The 2008 global financial crisis was combated together with the global community. South Korea finally achieved $30,000 in per capita income. But there is little sense of urgency against a looming perfect storm. The rivalling parties are busy attacking one another than joining forces to fight the national battle. Bipartisanship is essential in the face of national crisis.