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(EDITORIAL from Korea Times on Nov. 4)

All Headlines 07:01 November 04, 2019

Boost growth potential
:Export plunge raises risks of economic woes

The economy is showing no signs that it will recover anytime soon as exports ― the nation's main growth engine ― have continued to fall since December 2018. The country also faces mounting fears of deflation. If the Moon Jae-in administration fails to take drastic measures, Asia's fourth-largest economy may slide into a long-term slump.

According to data released Friday by the trade ministry, exports plunged 14.7 percent last month from a year ago. The decline was the steepest since January 2016 when overseas shipments tumbled 19.6 percent. More seriously, exports have been on an 11-month downward march.

The spiral has dealt a severe setback to the export-oriented economy. It also makes it difficult for the country to maintain its economic growth rate above 2 percent. Some research institutes at home and abroad have revised down their 2019 growth projection for Korea to the 1 percent level. No one can deny that a red light is already flashing over our economy.

The shrinking exports were attributed to deteriorating external factors: a global economic slowdown caused by rising trade protectionism, a prolonged U.S.-China trade war and the uncertainties over Britain's exit from the European Union. More specifically, the lower prices of semiconductors, which account for one-fifth of Korea's exports, have sapped its efforts to boost outbound shipments.

As a result, the country's exports to China, the country's biggest trading partner, plummeted 16.9 percent in October from the year before. Those to the U.S. dropped 8.4 percent. The ongoing Seoul-Tokyo trade dispute contracted exports to Japan by 13.8 percent. The nationalist Shinzo Abe government has taken trade measures against Korean firms over historical issues such as wartime force labor.

We can hardly expect those unfavorable global trade conditions to take a turn for the better anytime soon. That is why pessimism prevails over Korea's exports and its economic growth. Nevertheless, government officials argue there will be a rebound in exports in January, saying there are signs of improvement in the world economy. They believe the U.S.-China trade friction will be eased, if not resolved completely, if the G2 countries sign a truce soon as agreed upon.

Trade Minister Sung Yun-mo even predicted exports will gradually recover starting in November after hitting their nadir last month. We hope his prediction is anything but wishful thinking. Having optimism is often better than having pessimism. And yet optimism could be a recipe for failure if it is not backed by the appropriate action.

The authorities cannot solve the problem by expanding trade financing and export marketing for corporations. The economy is locked in a vicious cycle of sluggish consumption, falling production, lower investment and lower economic growth. The Bank of Korea lowered its key interest rate to a record low 1.25 percent in October. The liberal Moon administration has adopted an expansionary fiscal policy; but such monetary and fiscal easing has yet to produce its intended results.

Now President Moon and his officials should overhaul their macroeconomic policy. They need to change their policy direction if the current one does not work. It is time to think outside the box. They should no longer stick to rigid ideological lines. Instead, they must work out more comprehensive measures to boost Corporate Korea's competitiveness and growth potential.

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