(EDITORIAL from the Korea Times on Jan. 25)

Exit strategy

Korea's economy has long caught a cold whenever America sneezed, and now China
seems to be joining -- if not replacing -- the United States. It's a small
surprise then the local bourse was jolted when the Chinese financial authorities
showed signs of siphoning off excess liquidity last week.

It remains to be seen if Beijing's lending squeeze is a one-time action or a more
lasting change toward taking a stringency to cool its overheated economy aided
largely by government stimulus.
The Korean government and businesses alike will need to keep a close watch on
China, which is the nation's largest trade partner and the source of three
fourths of its trade surplus.
In a way, Beijing's latest move served as a timely reminder for most capitals,
including Seoul, of the single biggest topic for them in 2010: when and how to
implement "exit strategies."
President Lee Myung-bak has long made it clear that Seoul will not take any exit
strategy during the first-half of the year, saying -- rightly -- premature
monetary and fiscal tightening would kill the fledgling recovery.
It's also true, however, that belated action could result in various adverse
effects, including inflation and asset bubbles.
The government has extended the deadlines of its "emergency economic management"
twice from last to this June, meeting every week at an underground bunker in
Cheong Wa Dae, 26 of which were chaired by the President himself.
It's good that the government is not loosening its tension. For an economy as
well as for a person, however, an excessive, unnecessary state of tension may do
more harm than good.
Suffice to say for now the timing could differ by countries and the diverse
situations they are in. And more important than when to get out is in what
process the national economy should wean itself off the government stimulus, and
in what shape it should be when the economic operation returns to normalcy.
We hope the government's stimulus extension to the first half has nothing to do
with the June 2 local elections.
Also worrisome is the possibility that the government may meddle in monetary
policy, as shown by a vice finance minister's regular attendance at the central
bank's committee meeting to determine benchmark interest rates.
If and when the critical moments come for raising the policy rates, the monetary
authorities should also take maximum care not to ignite the fuse of a time bomb,
namely the over-swollen household debt. Most important of all will be how to
restructure ailing industries and businesses, as President Lee aptly said, "The
nation cannot afford to waste a good crisis."
But the biggest hope of most Koreans would be not to return to the system and
situation that threw Korea and the rest of the world into this crisis, such as
the reckless globalization, blind market idolatry and undue financial or casino
capitalism.
Unfortunately, however, this dream will likely end up just as that, given what's
happening here and in most capitals of the world.
(END)

Delete & Prev | Delete & Next