"Active External Economic Policy Strategy Needed to Overcome COVID-19 Export Crisis"

Hankyung Research Institute: "Economic Policy Cases from the Global Financial Crisis Should Be Utilized"

[Asia Economy Reporter Ki-min Lee] There has been a call for a more proactive external economic policy strategy to overcome the export crisis caused by the novel coronavirus infection (COVID-19) and to prepare for the post-COVID-19 era.

The Korea Economic Research Institute (KERI) argued in its report titled "Policy Implications for Overcoming the Export Crisis Due to COVID-19" that an external economic policy strategy should be established and price competitiveness should be secured to overcome the export crisis.

In the report, KERI emphasized the need to utilize past cases where external economic policies during the global financial crisis were shifted to growth policies aimed at expanding economic territory to prepare for the post-crisis era. For example, in 2010, the export growth rate to countries with which Free Trade Agreements (FTAs) were signed recorded 54.7%, which was 28.9 percentage points higher than the overall export growth rate. Additionally, the trade balance ratio relative to export volume to FTA partner countries was about twice as high, playing a significant role in improving the trade balance, according to KERI.

According to the report, an analysis of export statistics to 178 countries worldwide from 2005 to 2019 showed that when the real income of export destination countries increased by 1%, Korea's export growth rate improved by 1.2% to 1.4%.

Therefore, while the economic size of export destination countries is important, attention should be paid to countries expected to show rapid growth rates after COVID-19. In particular, countries that were relatively less affected by the COVID-19 shock are expected to recover relatively quickly in the future, so it is necessary to establish customized export policies for these countries in advance.

Furthermore, it was emphasized that the export increase effect due to FTA agreements is estimated to be as high as 17%, and efforts should be made to accelerate ongoing FTA negotiations to conclude them early.

In addition, KERI predicted that price competitiveness will become more important as a global recession caused by COVID-19 approaches. Researcher Tae-gyu Lee pointed out, "From the perspective of overseas consumers whose budgets have become more constrained due to income reduction, the importance of price has increased," explaining that enhancing and maintaining price competitiveness is crucial.

Researcher Lee further stated, "While it is not easy to quickly improve quality competitiveness in the short term, price competitiveness can be improved through institutional reforms," emphasizing that improving various regulations and systems that hinder price competitiveness, such as the rapid increase in minimum wage and high tax burdens on companies, is an urgent task for increasing exports.

This content was produced with the assistance of AI translation services.