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[Editorial] Ray of Hope for Economy Needed

Posted January. 02, 2009 03:00,   


The Korean economy is in a gloomy state because of unfavorable conditions triggered by the global economic crisis. If a sense of insecurity spreads too much, however, the self-fulfilling prophecy could further worsen the economy. Korea cannot give up hope, however, because a ray of hope is visible through the dark clouds.

Economic think tanks say international oil prices, which exceeded 140 dollars per barrel in July last year, will stay around 60 dollars this year and other commodity prices will fall. The won`s value, which had fallen to 1,500 per dollar in the second half of last year, is expected to stabilize to around 1,200. Inflation will drop from last year’s 4.7 percent to three percent this year, and the current account balance will turn from a deficit of six billion dollars to a surplus of between 10 billion and 22 billion dollars.

The three main goals of economic policy are growth, inflation curbing and surplus in balance of payments. Except in growth, weak yet positive signals are coming in the other two areas. When oil prices and inflation stabilize, the negative impact stemming from more budget spending and tax cuts can be offset. As a result, the government can devise policies to boost consumption and investment with more flexibility.

Timing is also crucial. A policy can be medicine if implemented in time, but turns into poison if carried out too late. It is necessary to immediately implement policies that can minimize a sudden economic slump by taking advantage of good opportunities for economic recovery. Though the government cannot implement bills that the National Assembly has yet to pass, it must do what it can.

Government officials, business leaders, employees and all other economic players have no time to waste. When all three major pillars of the Korean economy - consumption, capital investment and exports – are threatened in the first quarter, businesses could face difficulty in borrowing money and job security could get jeopardized. Politicians should learn from the lessons of the Asian financial crisis a decade ago. When the crisis in 1997 was looming, the ruling party was helpless in passing economic reform bills and dealing with insolvent businesses. Opposition parties also tried to hinder every reform plan. The government must focus on finance and export policies to stimulate the economy right now.