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[Editorial] Laidback before the onslaught of ‘permacrisis’

Published: 07 Dec. 2022, 20:10

Companies big and small are nervous due to multiple whammies on the global and domestic front and business uncertainties. A JoongAng Ilbo report discovered the financial statements of the country’s top 10 companies have become as dismal as the performance during the 2007-08 global financial crisis. The liquidity ratio reflecting the short-term payment capacity was as bad as the crisis period. The inventory turnover ratio showing how many times a company turned over its inventory relative to the cost of goods sold also deteriorated. Inventories have been piling up as goods do not sell well due to poor demand.

Third-quarter performance alone and some data from large companies cannot lead to the conclusion that the economy is in crisis. But if big companies are doing so meagerly, how tough things must be at smaller companies can be imagined. Combined operating income of Kospi-trading companies in the third quarter plunged 30 percent from the previous quarter.

President Yoon Suk-yeol attending the Trade Day ceremony on Monday reminded us that exports are the pillar to the Korean economy and the foundation for jobs. He declared his vision for Korea to become the world’s fifth biggest exporting country by 2026. The president would not be making a far-fetched goal since Korea has moved up to No. 6 from No. 7 last year in terms of shipments to foreign countries until November. But the export outlook for next year is grim. The global economy has been sinking fast. Collins Dictionary chose “permacrisis,” which combines permanent and crisis, as the word of the year to define an “extended period of instability and insecurity.” The Economist pointed out that the word best explains the global economy for next year. That spells trouble for Korea with high reliance on exports.

The Bank of Korea has downgraded our growth estimate for next year to 1.7 percent. But that too looks hard. International investment banks predicted Korea would grow barely above 1 percent after mid- 2 percent this year. The average growth estimate for Korea by nine investment banks is 1.1 percent. Nomura Securities even projected a contraction of 1.3 percent.

The National Assembly already passed the Dec. 2 deadline for next year’s budget bill. Cargo truckers have been on strike for two weeks. The government estimates shipping losses in the steel, petrochemical, cement, refining and automobile sectors to reach 3.5 trillion won ($2.7 billion).

Six business organizations held a joint press conference to oppose the revisions to the Labor Union Act that would undermine business competitiveness by making the country a good place to strike instead of doing business. The crisis is coming closer, and yet politicians and unions are carefree. Can this be normal?