92 Percent of Economy Linked to External Trade

By Yoon Ja-young Staff Reporter Imports and exports made up 92.3 percent of the Korean economy last year, breaching the 90-percent mark for the first time. Economists warn this could lead to the economy being harmed by external factors due to the country's dependence on the sector. According to the Ministry of Strategy and Finance, Wednesday, the ratio of exports and imports to national income was 92.3 percent last year, a record high. Exports accounted for 45.4 percent, with imports claiming 46.9 percent. The ratio of trade to national income hovered between 50 and 70 percent until 2007, but suddenly jumped by over 20 percentage points last year. Some economies depend more heavily on trade than Korea. Singapore saw its ratio record 361.7 percent last year, followed by Hong Kong with 348.4 percent. Among other Asian countries, Malaysia, Thailand and Taiwan also had higher ratios than Korea. Dependence on trade is inevitable for a small economy such as Korea that has to export goods and services. However, the trend can incur problems. "Export-led growth is known to incur such side effects as increasing volatility from overseas shocks, a withering domestic market, and decreased job creation," said Kim Bae-keun of the Bank of Korea. He added that export-led growth worsens trade terms, while advances in technology on the domestic market increase both consumption and real income. Korea, for example, saw its economy shaken amid the global financial crisis last year. The won-dollar rate breached 1,500 won per greenback as the Korean currency faltered. The outlook for the fourth quarter and next year is also negative as falling demand from the country's export markets mars economic recovery. In the case of Hong Kong, the World Bank estimates the economy to contract by 3 percent this year due to a high dependency on trade. The Japanese economy, meanwhile, depends only 31.6 percent on trade, with its domestic market sufficiently developed. The government has been pondering ways to develop the domestic market. It is especially focusing on the services industry, such as education, medicine and law. "Our economy fluctuated too much due to outside shocks," Strategy and Finance Minister Yoon Jeung-hyun said last week. "Changing the structure of the economy is not an easy task, but it can't be delayed any longer," he said, adding that further deregulation was needed in the services sector. chizpizza@koreatimes.co.kr