EDITORIAL from The Korea Herald on Nov. 10)

Slowing economy

Korea's exports next year will total between $480 billion to $490 billion, if
economic think tanks are accurate in their forecasts. But the government says
that the nation will have to export more than $500 billion worth of goods if it
is to generate 4 percent growth, as targeted by the government.
The Korea International Trade Association estimates 2009 exports at $482.5
billion and imports at $480 billion. The projected trade surplus, though small,
would represent a vast improvement on this year's trade balance, which KITA says
will finish with a $7.8 billion deficit.
True, KITA is more conservative in its export estimate than the Samsung Economic
Research Institute ($484.7 billion) or the LG Economic Research Institute ($486.7
billion). But KITA's prediction may prove to be more realistic, given the
worsening global economic outlook.
Revising its earlier forecast, the International Monetary Fund has recently
painted a gloomier picture for next year. It says the world economy will have
grown 3.7 percent this year. But it says growth will slow to 2.2 percent next
year, a reduction from its forecast of 3 percent last month.
Worse still, Korea's major trading partners, such as the United States, Japan and
the euro-zone, are the places worst hit by the downturn. The IMF says their
economies will contract 0.7 percent, 0.2 percent and 0.5 percent, respectively.
The Korean economy is much more vulnerable to a business downturn in the outside
world than many other countries. The reason is that Korea's dependence on
external trade, as measured by the total amount of trade divided by gross
national product, is more than three times as high as that of the United States
and more than twice as high as that of Japan.
In other words, there is a limit to the extent a business slump can be fought by
boosting domestic consumption alone. Apparently for this reason, the government
is insisting that all efforts be made to boost exports by 12 percent to $500
billion next year.
But Korean exporters are already feeling the pinch from the deepening global
slump. Last month, exports grew 10 percent on a year-on-year basis to $37.89
billion. Though double digit, the growth rate, which was a 13-month low, was less
than half the previous nine-month average. It seems to be a matter of time before
the rate drops to single digits.
What made the slowdown bearable, though, was that the nation had a trade surplus
for the first time in five months. The $1.2 billion surplus mainly resulted from
the sharp reduction in oil prices.
The government has much to do if it is to help promote exports next year. It has
already promised an increase in the insurance coverage of exports by 40 trillion
won to 170 trillion won next year. Obtaining approval from a downturn-wary
National Assembly should not be too difficult.
An increase the government's contribution to Korea Export Insurance Corp. for
wider coverage is not enough. The government will have to do everything it can do
to facilitate exports.
The first step the government should take in this regard is to review all the
requests traders made at an export promotion conference last week and determine
what it can do about them. The requests, many of them from small and medium-sized
companies, included easier access to credit, assistance in overseas marketing and
greater help from Export-Import Bank and the official export insurance agency.
For their part, exporters will have to improve the quality of their products,
explore new markets -- especially countries rich in natural resources -- and
develop new marketing strategies. They should also make the best use of the weak
Korean currency and the lower interest rates to improve their exporting prowess.
(END)