[Editorial] Sluggish exports

In an interview with news outlets on Sunday, President Lee Myung-bak sounded an optimistic note about the Korean economy, claiming that the nation would be able to balance its budget next year as growth would begin to recover, albeit at a slow pace. Though Korea has experienced a slowdown for a while, he said, it is not entering an era of low growth, as Japan did a few decades ago.

But the president’s outlook bordered on wishful thinking, rather than being based on a careful reality check. His projection of a balanced budget was anchored on the false assumption that the Korean economy would grow 4 percent next year.

Few state-funded economic think tanks and financial institutions believe that it would regain such vitality. Instead their growth outlooks range from 3 percent to 3.5 percent. Private institutions are even more pessimistic. Moreover, Lee was ignoring that his administration’s 2013 budget request was designed to sustain a deficit, even though the budget officers maintain that the shortfall would be so negligible that it could be called a balanced budget.

If the Korean economy is to gain any semblance of budgetary balance, robust exports will drive growth, as they have done in the past. Here again, the prospects are not so bright.

Han Duck-soo, chairman of the Korea International Trade Association, says the nation’s exports cannot be expected to grow by double digits for some years. The reason, he says, is that the global economy will not be able to recover to its pre-crisis vigor anytime soon.

The KITA says exports will reach $575 billion in 2013, up 4.6 percent from this year, if the Korean won’s exchange rates remain stable and growth in the world economy hovers around the 3.5 percent level. But the United States, claiming the Korean currency is undervalued, is already putting mounting pressure on the Korean government not to intervene in the foreign exchange market.

As Han says, the nation will have to go back to the basics if it is to surmount obstacles to export promotion. Corporations will have to continue to move up to the manufacture of high-end products for exports while the government focuses on training workers for the skills that are high in demand. Han is right to say that exports are destined to grow no matter what, if Korean corporations are able to provide high-quality products at low costs.