[Editorial] Cloud over economy

South Korea maintains a current account surplus, driven by robust exports, but the surplus is declining.

The country racked up a current account surplus of $6.6 billion in August, according to data compiled by the Bank of Korea on Tuesday. It was the fourth consecutive month in the black.

But the August surplus was nearly $2.4 billion smaller than the July surplus ($8.97 billion) and about half of the June figure ($12.56 billion).

The central bank expected the current account surplus to continue for some time, considering the upward trend of exports, but it said uncertainties remained. Among them are the ever-changing economic conditions of major countries, the speed of the recovery in domestic demand and the escalating conflict in the Middle East.

While Korea's current account balance remains positive, its downward trend makes it difficult to stay optimistic about the future of the South Korean economy.

To make matters worse, a crisis looms over Samsung Electronics which has a great influence on the country’s economy. It accounted for about 18 percent of South Korea's exports last year.

Samsung Electronics estimated its third-quarter operating profit at 9.1 trillion won ($6.7 billion) on Tuesday. The operating profit increased year-over-year, but it was way below market expectations. Securities companies initially expected its operating profit to be around 14 trillion won.

The operating profit rose back past 10 trillion won in the second quarter, for the first time since the third quarter of 2022, but fell back below that level.

It seems to be affected greatly by a slower-than-expected recovery of demand for smartphones and sluggish sales of widely used DRAM chips, one of the chipmaker’s major products. The company's slower performance in the high-bandwidth memory business also weighed heavily on the third-quarter earnings guidance.

Samsung Electronics issued an unusual apology for the disappointing performance. It is the first time the tech giant's top leadership has apologized over an earnings announcement.

Jun Young-hyun, head of the company's semiconductor division, said a recovery of “fundamental technological competitiveness” was the way to overcome a crisis. It is the right direction. Samsung Electronics became world No. 1 on the foundation of technological leadership which was hard for competitors to keep up with. But that leadership shows signs of shaking. What Samsung needs now is bold change and innovation, as the late chairman Lee Kun-hee emphasized in its iconic “1993 Frankfurt declaration.”

Samsung Electronics must try its best to restore its fundamental technological competitiveness, but governmental support is increasingly important, not least in the high-tech industry. With technology emerging as a key factor of national power, competition in the field is not limited to companies anymore. The Korean government and the National Assembly say semiconductors are strategically important, but they do not act to support it.

According to a report released by the Federation of Korean Industries on Monday, the US gave $8.5 billion in subsidies to Intel, China gave $270 million to SMIC, and Japan gave $6.3 billion to Rapidus last year to prop up their semiconductor industries. But Korea's semiconductor subsidy total was zero. The same is true of secondary batteries and displays. Major competitors support strategic high-tech industries on the governmental dimension. If Korea hesitates to support high-tech industries, it will lose its global competitiveness in semiconductors.

As tensions escalate in the Middle East, the surging international prices of petroleum are causing concerns, too.

On Monday, Brent crude futures for December delivery closed at $80.93 per barrel on the ICE Futures Exchange, a 3.7 percent increase from the previous trading day. Brent crude prices, viewed as the benchmark oil prices, bounced up past $80 per barrel about a month after late August.

Korea should keep its guard up for possible oil shocks from the Middle East. The upward trend of global oil prices will likely raise the import prices of raw materials, which can adversely affect South Korea’s exports and economy. Now is the time to watch out for widening volatility in the global economy and respond proactively.