The Korean economy is under siege. Look around, then you will see gloom and doom, from the delayed recovery of the global economy, the slowdown of the Chinese economy and low oil prices to dwindling exports, sluggish domestic demand, consumption and investment. Problems like youth unemployment, household debt and impending massive layoffs threaten social stability.

The Bank of Korea has cut its growth forecast for this year to 2.8 percent from 3 percent, which is still higher than forecasts made by most international agencies and local private think tanks.

In yet another latest set of data attesting to the dismal situation, the Financial Supervisory Service said that the number of corporate credit rating downgrades has hit the highest mark in 17 years.

The number of companies whose credit ratings were downgraded stood at 159 in 2015, the highest since the Asian financial crisis in 1998, when the comparable figure was 171. Heavily affected were companies in sectors that were hit by a global slump such as steel, construction, refinery and petrochemicals.

The situation is gloomier in some of Korea’s major industries such as shipbuilding and shipping, which are bracing for radical restructuring that will result in massive layoffs. Media dispatches from Geojedo Island, the hub of shipbuilding which once was the pride of the Korean economy, portray desolate scenes of vacant factories and a rapidly cooling local economy.

The problem is that there seems to be no easy way out of the current doldrums. Policymakers need an effective combination of monetary and fiscal policies as well as swift and efficient restructuring of troubled sectors and companies.     

The Bank of Korea on Tuesday kept the key interest rate at 1.5 percent for the 10th consecutive month. The central bank may well believe that at this stage, lowering the rate will have little effect on consumption and investment. It also needs a tool in case the Chinese economy slows down further or the U.S. raises interest rates.

Having spent 33 percent of the state budget in the first quarter, the government also does not have enough room for additional frontloading. This may require the government to write a supplementary budget, for which political parties’ cooperation is essential.

Also important and urgent is the restructuring of struggling sectors such as shipping and shipbuilding. It is a relief that the main opposition The Minjoo Party of Korea and splinter People’s Party are moving to work with the government and the ruling Saenuri Party on the restructuring issue.

After last week’s general election, Moody’s said Saenuri’s loss of its parliamentary majority is likely to make it harder to pass structural reforms, and that could be have negative effect on the nation’s sovereign credit. 

We hope the rating agency’s concern was ungrounded. The Korean economy cannot afford a further fall.