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[Opinion] ‘Recession Trade Surplus’

Posted January. 05, 2009 03:00,   


When the economy is bad, many companies resort to contractionary business management. This is a way of window dressing their financial statements to cut costs and make up for falling sales and profits stemming from recession. In such a situation, staff and suppliers inevitably suffer even if a company posts the same profit as it did in an economic boom. Oftentimes, employers and suppliers must find it fortunate that they have their jobs and business ties with the company.

The Knowledge Economy Ministry has predicted the trade balance, which posted an annual deficit of 13 billion U.S. dollars last year, will see a surplus of 11.9 billion dollars this year. A closer look, however, shows that this is not all good news. The expected surplus will be one stemming from recession, which results from falling prices of international oil and other commodities and a plunge in imports stemming from sluggish domestic demand amid a lackluster export market. Such a “recessionary” surplus might be better than a deficit, but is bad for the economy and the people’s livelihood.

There is no need to overly downplay this surplus, however. If Korea can remain in the black in its trade and current accounts, this will help end the vicious cycle in the Korean economy, including the unstable exchange market. The gradual increase in foreign exchange reserves could help stabilize the won, suppress the “Sell Korea” sentiment of foreign investors, and ease the credit crunch of domestic companies. Though such a surplus will have little immediate impact on the real economy, it will also help a revival if it eases jitters in the forex and financial markets. When the global economy was embroiled in a deep financial crisis last year, the prevailing maxim was “Cash is king,” regardless of country or company.

The starting point of attaining a trade surplus is exports. Korea heavily depends on exports for economic growth, with exports accounting for 40 percent of gross domestic product. Exports are hoped to produce a breakthrough for the Korean economy. The harsh reality on the export front cannot be ignored, but if Koreans explore foreign markets and develop competitive products with their unique spirit of challenge, a breakthrough is possible. It is time for companies and the government to go all out in raising exports. The public should also extend its full support for Korea to transform a surplus stemming from recession to one resulting from an economic boom.

Editorial Writer Kwon Soon-hwal (shkwon@donga.com)