EDITORIAL from the JoongAng Daily on Nov. 28)

Keep it in the black

Korea reported a bigger-than-expected current account surplus in October - $4.91
billion. This helps Korea secure needed liquidity. Since a current account
surplus affects foreign currency supply and demand, October???s surplus will calm
the nation???s chaotic foreign currency and financial markets.

In fact, Korea witnessed current account deficits every month this year except
June and October, negatively impacting the nation???s economy.
At a time when the entire world is coping with an economic recession, the most
important thing is keeping the current account in the black well into the first
half of next year. By doing so, relief will spread to the local financial market
and Korea can restrengthen its fundamentals.
However, it is hard to cheer about October???s surplus after looking at the
details.
The country was only able to report the surplus because the price of crude oil
dropped and Koreans traveled overseas less. The bad news is that despite the
local currency???s low value against the greenback, exports declined. Exports of
Korea???s flagship products - semiconductors, automobiles and home appliances -
all declined. This means the world???s economic situation is worse than expected.

Above all, it is not a good sign that the capital account recorded a deficit of
$25.5 billion, which means foreign investors kept selling shares and bonds even
after the Korean government guaranteed banks??? foreign loans. When announcing
October???s current account surplus, the Bank of Korea also said yesterday that
it will receive $4 billion from the U.S. Federal Reserve through a currency swap
agreement. This means the central bank has admitted that the current financial
market is not good.
The won-dollar exchange rate hovers around 1,500, and nobody knows when Korea???s
foreign currency reserves will dip below the $200 billion mark.
We need to come up with safety measures. First, Korea must finalize the $30
billion-currency swap negotiations underway among Korea, China and Japan.
We also need to revive the nation???s exports, which are our only way to survive.
Local banks still deny letters of credit to companies, while the credit limits
for trade loans have been lowered. The central government should do something
about this so that exporters won???t face worse difficulties.
For now, keeping the current account surplus in the black is the only hope for
riding out financial instability and economic crisis.