[Editorial] Dark Clouds Of Long-Term Recession

The national economy is on the verge of crisis due to the structural weakness on top of the world wide economic downturn. As three axis of world economy, that is, the U.S., Europe, and Japan, have rushed into the economic recession simultaneously, the economy of South Korea, which is highly dependent on exports, became unsteady. Industrial production has turned to the minus growth in 32 months, and exports have also declined for 5 months.

Slump in exports due to the fall of the unit price of semiconductor is said to be the major cause for the economic decline. However, it is possible to interpret the situation that as semiconductors are no longer effective, the South Korean economy reveals the structural weakness.

The U.S. market, which is the major export market of South Korea, is likely to suffer a long-term recession. Moreover, the outlook for the recovery of the U.S. information technology (IT) business, which controls the semiconductor exports, is likely to be delayed. Private economic research institutes pessimistically anticipate that the economic recovery will begin in a full-scale in the latter half of the next year.

There are not many desirable policy measures which the government can choose since the South Korean economy is highly dependent on foreign countries amid declining world economy. Although the Bank of Korea may lower the interest rate more to boost the economy, companies which forecast the long-term economic decline are unlikely to expand the investment despite the low interest rate.

Although the government may not be able to do anything about the overseas factors, it is necessary to stimulate the domestic demands to prevent the rapid economic shrinkage. Economists agree that while continuing the structural adjustment, the government should enforce decisive economic control policies. In order to increase the domestic demands, it is necessary for the government to promptly and effectively enforce the finance, and to consider the supplementary budget.

It is unnecessary to be frustrated to the extent to damage the will of the economic activities. Not only the economy of South Korea, but also the world economy, is not good overall. At this point, the government and companies should prepare for the long-term economic decline, and plan countermeasures in every arena.

Political unrest and excessive social and political conflicts negatively affect the economic activities in direct ways. Companies are worried about the changes in the political situation for next year when the presidential election is to be held. Their anxiety is one of the causes of economic decline in investment.

Although the ruling and the oppositional party cry for the economic recovery, they, rather, expand the feeling of anxiety through the wasting political strife, instead of making an effort to resolve the political anxiety that shrinks the economic activities. The ruling and the oppositional party`s joint efforts for the legislation, which will underpin the economic recovery, while eliminating factors of anxiety for the economic activities, are urgently required.