[Editorial] Concerted Efforts Needed to Overcome Crisis

In the wake of the global financial crisis, Korea’s financial market has tumbled more than its Asian counterparts with a similar economic scale. Certainly, Korean stocks and the won’s value have plummeted. With the current account deficit reaching 12.5 billion U.S. dollars in the first eight months of the year, other economies doubt if Korea can repay its debts. Business confidence has not returned to Korea despite the country having the world’s sixth-largest foreign reserves.

The domestic financial sector is paying keen attention to Korea’s current account balance for October to be released by the end of next month. The government predicts that the current account balance will record a surplus as oil prices have fallen and reduced overseas travel because of the weakening won. Many experts also forecast that the trade balance, which has stayed in the red since the first month of this year (except for May), will return to the black to the tune of one billion dollars in October, thanks to the cut in oil imports from eight billion dollars in September to 6.5 billion dollars in October.

A current account surplus can be a good chance to make a positive impact on Korea’s sovereign rating and improve foreign investor perception of the Korean economy. A surplus can also soothe jitters over the dollar shortage, thus stabilizing the foreign exchange market that has been jarred by the aftermath of the global financial turmoil.

Even if Korea records a current account surplus in October, it cannot gloat. Due to the U.S.-originated financial crisis, Korea’s exports to the U.S. market have fallen sharply and growth of Korean exports to China has also significantly slowed. As the aftermath of the financial crisis spreads to the real economy next year, Korean exports of consumer goods to advanced economies and those of intermediate and capital goods will decrease.

It’s high time for the government to make more efforts to boost exports. For example, it needs to provide practical help such as tax breaks for domestic exporters. The government, companies and households should make a concerted effort to prevent foreign currencies from flowing to foreign markets without good reason. If Koreans choose to travel in the country instead of overseas, they can improve service balance, which recorded a deficit of 20.5 billion dollars last year. Concerted efforts to replace imported goods with domestic products can also contribute to improving the trade balance.

Only when Korea records a trade surplus can it protect the economy from fluctuations in the global financial market.