Similar Recessions

 

It is predicted that South Korea’s economy will resemble to that of Japan with a high-valued currency and a current account surplus.

According to a report made by Lee Chang-sun and Lee Geun-tae, researchers at LG Economic Research Institute, Korea’s current economic condition is similar to that of Japan in the late 1980s. Thus, the vicious circle of long-term economic slowdown witnessed in Japan can also occur in Korea. 

The researchers said, “A 10% appreciation of the won leads to a 5% decrease in exports. In particular, the textile and garment industry, the agricultural and fishery product sector, and the livestock product sector will suffer tremendously, since those industries do not have competitive advantages on an international scale.” 

They pointed out, “A mid-long term strategy for preventing the won’s appreciation is to increase domestic demand. In addition, an excessive amount of current account surplus ought to be avoided. Furthermore, an improvement in investment conditions in Korea is needed to forestall the offshoring of production bases to other countries.”

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