(EDITORIAL from the Korea Times on April 21) - Signs of turnaround

It is upbeat news that South Korea may see an economic rebound at the fastest pace among major economies around the world. The news is based on a report by the Organization for Economic Cooperation and Development (OECD) that said the composite leading index (CLI) for the nation increased to 94.5 in February, up 1.6 points from 92.9 a month earlier.

The 1.6-point gain is higher than that recorded by other countries. Mexico showed
a rise of 0.5 points, followed by Italy's 0.4 points and Turkey and Finland both
with 0.3 points. The CLI is a composite indicator measuring economic prospects
based on such indicators as industrial output, housing and financial market
conditions, and gross domestic product (GDP).
But the OECD report still paints a gloomy picture for the world economy. The CLI
for G7 countries dropped 0.8 points, while the average for the 30 member states
of the OECD went down 0.6 points. Therefore, it is still too early to predict a
quick recovery for the Korean economy, although it is likely to show a mild
rebound in the latter half of the year. The stark reality is that we are still in
a long, dark tunnel with no end in sight.
In fact, policymakers as well as scholars and economists are cautious about
expectations about a full-swing recovery because the current global and economic
crisis is the worst since the Great Depression. They are well aware of the fact
that being too optimistic about the nation's economic future could put it deeper
into recession because Korea is heavily dependent on exports. In a nutshell, the
country cannot achieve a strong turnaround without a recovery of the world
economy.
The severity of the ongoing turmoil was echoed by President Lee Myung-bak's
remarks last week that the economy now "stands somewhere in the middle of a long
tunnel." Strategy and Finance Minister Yoon Jeung-hyun also said in an interview
with CNN that it is too early to predict how the economy will fare down the road
as negative factors coexist alongside positive ones. The Bank of Korea has
already predicted that the economy will shrink 2.4 percent this year, compared
with a 4-percent contraction forecast by the International Monetary Fund (IMF).
But we do not necessarily need to become too pessimistic about the economic
outlook. What's important is to accept the situation as it is ??? and to map out
necessary measures to ride out the unprecedented crisis. Don't try to be reckless
and foolhardy to make a quick result, because haste makes waste. We'd better be
ready to face a long period of economic hardship, during which all economic
players ??? the government, businesses and households ??? are required to make
concerted efforts to boost long-term growth potential.
Policymakers should do their best to contain risky factors such as excess
liquidity and economic bubbles that are side effects of monetary easing and
fiscal expansion. First and foremost, all players must make joint efforts to push
radical restructuring to get rid of overcapacity, highly leveraged operations and
bad debts. It is urgent to take a long-term strategy to reduce the nation's heavy
reliance on exports by expanding the domestic market as a new growth engine.
(END)