(EDITORIAL from the Korea Herald on March 5) - Long way to go?

Panic appears to be gripping the Korean financial markets again, with stocks and the Korean currency on a rollercoaster ride. Are doomsayers patting themselves on the back for their earlier prophecy about a new March crisis?

Stocks took a drubbing on Monday, the first day of trading in March. Their
benchmark index fell to a three-month low on concerns that both industrial output
and exports were in a tailspin.
Industrial output in January plunged 25.6 percent from a year ago. Exports, which
dropped as much as 32.8 percent in January, declined again last month - though by
a smaller margin of 17.1 percent this time.
The won also plummeted on March's first day of trading. After breaching the
psychological barrier of 1,600 won per U.S. dollar, the Korean currency closed at
1,570.3 on Monday, down 2.38 percent from Friday.
Volatility has since continued in the stock market. It has been the same with the
foreign exchange market, sending the government scurrying to stabilize it through
massive intervention. Given the renewed instability in the financial markets, few
could be blamed for wondering aloud if the weakening Korean economy really would
bottom out in the first quarter of this year and start to recover in the second
quarter, as the administration promised.
The Korean economy may have a long way to go until it recovers stability. Still,
it is too early to abandon the hope that the Korean economy will begin to rebound
by the end of this year, if not in the second quarter, should the administration
work closely with the political community.
Indeed, a recent compromise between rival political parties on
administration-initiated bills has cleared the way for large corporations to make
new investments. Corporations of a large business group will be freed from a ban
on investing 40 percent of their net assets or more to acquire shares in other
companies.
The latest legislative work, which also includes tax cuts on apartment purchases,
job-creation schemes and others, will certainly boost the economy, albeit not as
promptly as subsidies or additional spending on public works projects. But the
administration will have to take additional measures if it wishes to hold back
the slide into recession and then right the economy as soon as possible.
It goes without saying that additional fiscal spending should be the first among
such measures to be taken urgently. With the central bank's benchmark rate at a
historic low, monetary policy cannot be seen as a reliable stimulus tool any
longer.
That is the reason why the National Assembly will have to waste no time in
dealing with a supplementary budget bill, which the administration is scheduled
to submit later this month. The stimulus package being drawn up reportedly
includes cash aid for the poor and additional big-ticket projects as well as
borrowings to make up for an anticipated shortage of tax revenues.
The amount of money the administration is planning to ask for will reportedly top
30 trillion won. That is a huge amount - a supplementary budget is usually a few
trillions of won. It is so large that opposition parties may be tempted to demand
a sizable cut.
But the opposition parties will have to realize that the anticipated shortage of
tax revenues alone is projected to exceed the 10 trillion won mark this year.
They will also have to understand that the forthcoming bill will be designed to
combat an economic crisis of historical magnitude, not to finance recovery from a
natural disaster, as is often the case. They are urged to endorse the
supplementary budget with little change, if transparency in spending is
guaranteed.
(END)