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[Editorial] Deteriorating conditions
Korean economy should brace for more difficulties
By Korea HeraldPublished : Dec. 2, 2014 - 21:19
Korea is all set to mark a record high of annual trade volume this year. In the first 11 months of the year, the amount of its exports and imports combined exceeded $1 trillion for a trade surplus of $40.4 billion, according to government figures released Monday.
The fastest pace of surpassing the $1 trillion mark was attributed largely to the effect of free trade accords signed with major trading partners, as shown in robust increases in exports to the U.S. and the European Union, which more than offset decreases in shipments to China and Japan.
In November alone, however, the country’s exports dropped by 1.9 percent from a year earlier to $46.9 billion, according to data from the Ministry of Trade, Industry and Energy. This decline was due mainly to a cut in the number of working days, ministry officials said.
But the decrease in exports, coupled with imports shrinking at a faster pace, is a reminder of the deteriorating economic conditions at home and abroad.
In a poll released Sunday, heads of the country’s major economic research institutes said external uncertainties and weak domestic consumption would make it hard for Asia’s fourth-largest economy to grow by 3.9 percent next year as forecast by the government. Negative factors cited by them include expectations of U.S. interest rate hike, slumping growth in China and deflation concerns in Japan and the eurozone.
A separate survey of the country’s 600 largest corporations in terms of sales showed that more than 81 percent of them believed economic conditions have deteriorated to a serious extent, locking the country’s manufacturing sector and exports in a systemic crisis. Most of them forecast the growth rate would hover far below 3.9 percent next year.
These unfavorable economic conditions will make it inevitable for government policymakers to carry out their expansionary fiscal and monetary measures in 2015. The Bank of Korea is also expected to further lower its key interest rate next year from the current record low of 2 percent.
It is also essential to accelerate deregulation to encourage companies to make more investments. This effort needs to be matched with active corporate restructuring aimed at enhancing competitiveness.
The fastest pace of surpassing the $1 trillion mark was attributed largely to the effect of free trade accords signed with major trading partners, as shown in robust increases in exports to the U.S. and the European Union, which more than offset decreases in shipments to China and Japan.
In November alone, however, the country’s exports dropped by 1.9 percent from a year earlier to $46.9 billion, according to data from the Ministry of Trade, Industry and Energy. This decline was due mainly to a cut in the number of working days, ministry officials said.
But the decrease in exports, coupled with imports shrinking at a faster pace, is a reminder of the deteriorating economic conditions at home and abroad.
In a poll released Sunday, heads of the country’s major economic research institutes said external uncertainties and weak domestic consumption would make it hard for Asia’s fourth-largest economy to grow by 3.9 percent next year as forecast by the government. Negative factors cited by them include expectations of U.S. interest rate hike, slumping growth in China and deflation concerns in Japan and the eurozone.
A separate survey of the country’s 600 largest corporations in terms of sales showed that more than 81 percent of them believed economic conditions have deteriorated to a serious extent, locking the country’s manufacturing sector and exports in a systemic crisis. Most of them forecast the growth rate would hover far below 3.9 percent next year.
These unfavorable economic conditions will make it inevitable for government policymakers to carry out their expansionary fiscal and monetary measures in 2015. The Bank of Korea is also expected to further lower its key interest rate next year from the current record low of 2 percent.
It is also essential to accelerate deregulation to encourage companies to make more investments. This effort needs to be matched with active corporate restructuring aimed at enhancing competitiveness.
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Articles by Korea Herald
