ID :
97495
Thu, 12/31/2009 - 07:58
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Shortlink :
https://www.oananews.org//node/97495
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(EDITORIAL from the Korea Times on Dec. 31) - Record Surplus: New Paradigm Needed to Ensure Sustainable Growth
It is good to hear that the nation's current account surplus will hit an all-time
high of $43 billion this year. The Bank of Korea (BOK) said Tuesday that the
surplus rose to $41.2 billion in the January-November period, breaking the 1998
record of $40.3 billion. This proves that South Korea, the world's 15th-largest
economy, has performed better than expected amid the worst global crisis since
the Great Depression.
At the start of the crisis, pessimism prevailed that the country would suffer
badly due to its undue reliance on exports. But Korea has fared well to turn the
worldwide turmoil to its advantage. It has successfully made use of factors
conducive to its exports ??? the steep depreciation of the local currency and
stabilized prices of oil and other natural resources. The Korean won tumbled to
an 11-year low against the U.S. dollar in March. Simultaneously, the strength of
the Japanese yen has also contributed to booming exports of Korean products.
It is a fresh surprise that the nation's five major export items ???
semiconductors, cell phones, automobiles, ships and flat panel displays ??? have
expanded their international market shares to their record levels. Memory chip
exports by Samsung Electronics and Hynix Semiconductor met 61 percent of global
demand this year, up from 49.6 percent in 2008. The world market share of
Korean-made liquid crystal display (LCD) panels rose from 45.8 percent to 52.1
percent. That of mobile phones increased from 24.5 percent to 30.6 percent. The
shares of autos and ships also edged up to 7.3 percent and 34.4 percent,
respectively.
More conspicuous is that the country managed to get out of the
recession-triggered surplus structure last month. Korea had suffered from a
contraction in both exports and imports from November 2008 till October 2009.
Despite this setback, the nation has been able to enjoy the current account
surplus, especially because its imports recorded a far greater shrinkage than its
exports. But, such an undesirable structure came to an end last month when
exports soared 18 percent year-on-year, while imports went up 2.4 percent.
Now the question is how to maintain the growth momentum and sustain the surplus
trend. The central bank predicted that the current account ??? the broad measure
of trade, services and capital flows into and out of the country ??? will remain
in the black for the time being. But the amount is expected to decrease to $17
billion next year, affected by the strengthening won and a rebound in the prices
of crude oil and other raw materials. Even so it is hard to rule out the
possibility of a current account deficit starting in 2012. As such, the nation
will find it difficult to continue sustainable growth unless it changes its
export-oriented economy.
Therefore, it is important to reduce the country's excessive reliance on exports
and boost domestic demand so that it can improve its economic resilience against
external shocks and the rapidly changing environment. Since the outbreak of the
1997-98 Asian financial crisis, policymakers have promised to beef up the
nation's services industry in a move to create more jobs and fuel domestic
consumption. But they have so far made little progress in doing so. It's time to
create a new economic paradigm to ensure sustainable growth with a balance
between exports and domestic demand.
(END)
high of $43 billion this year. The Bank of Korea (BOK) said Tuesday that the
surplus rose to $41.2 billion in the January-November period, breaking the 1998
record of $40.3 billion. This proves that South Korea, the world's 15th-largest
economy, has performed better than expected amid the worst global crisis since
the Great Depression.
At the start of the crisis, pessimism prevailed that the country would suffer
badly due to its undue reliance on exports. But Korea has fared well to turn the
worldwide turmoil to its advantage. It has successfully made use of factors
conducive to its exports ??? the steep depreciation of the local currency and
stabilized prices of oil and other natural resources. The Korean won tumbled to
an 11-year low against the U.S. dollar in March. Simultaneously, the strength of
the Japanese yen has also contributed to booming exports of Korean products.
It is a fresh surprise that the nation's five major export items ???
semiconductors, cell phones, automobiles, ships and flat panel displays ??? have
expanded their international market shares to their record levels. Memory chip
exports by Samsung Electronics and Hynix Semiconductor met 61 percent of global
demand this year, up from 49.6 percent in 2008. The world market share of
Korean-made liquid crystal display (LCD) panels rose from 45.8 percent to 52.1
percent. That of mobile phones increased from 24.5 percent to 30.6 percent. The
shares of autos and ships also edged up to 7.3 percent and 34.4 percent,
respectively.
More conspicuous is that the country managed to get out of the
recession-triggered surplus structure last month. Korea had suffered from a
contraction in both exports and imports from November 2008 till October 2009.
Despite this setback, the nation has been able to enjoy the current account
surplus, especially because its imports recorded a far greater shrinkage than its
exports. But, such an undesirable structure came to an end last month when
exports soared 18 percent year-on-year, while imports went up 2.4 percent.
Now the question is how to maintain the growth momentum and sustain the surplus
trend. The central bank predicted that the current account ??? the broad measure
of trade, services and capital flows into and out of the country ??? will remain
in the black for the time being. But the amount is expected to decrease to $17
billion next year, affected by the strengthening won and a rebound in the prices
of crude oil and other raw materials. Even so it is hard to rule out the
possibility of a current account deficit starting in 2012. As such, the nation
will find it difficult to continue sustainable growth unless it changes its
export-oriented economy.
Therefore, it is important to reduce the country's excessive reliance on exports
and boost domestic demand so that it can improve its economic resilience against
external shocks and the rapidly changing environment. Since the outbreak of the
1997-98 Asian financial crisis, policymakers have promised to beef up the
nation's services industry in a move to create more jobs and fuel domestic
consumption. But they have so far made little progress in doing so. It's time to
create a new economic paradigm to ensure sustainable growth with a balance
between exports and domestic demand.
(END)
