| World financial markets jolted Tuesday on deepening financial woes in emerging market economies and worries of slowdown in the U.S. and Chinese economies. Following Monday`s heavy losses of the U.S. and European stock markets, Asian shares including Japanese also plunged Tuesday while Korea`s main stock index KOSPI plummeted for the second straight day, closing below 1,890.
Global financial woes deepened after currencies in Argentina, Turkey and Thailand sharply weakened on January 23. Wall Street Journal said crisis is spreading from some vulnerable countries to most of emerging markets and some of advanced countries. Concerns are rising that a third global economic crisis would follow after the U.S.-originated financial crisis in 2008 and eurozone-led fiscal crisis in 2010.
In the U.S., January manufacturing index fell to its lowest since May last year, and December employment indicators were also worse than expected. In China, the purchasing managers` index in both manufacturing and service industries fell, coupled with concerns of troubles in financial institutions. Emerging market economies are also suffering from unstable financial markets since they promoted rate hikes to protect their currencies. In 2008 and 2010 crisis, China and some emerging economies were the "knights in shining armor" that helped buffer the shocks of global crisis. However, no country seems to be acting as savior in the current crisis.
Korea needs strong leadership by economic and financial authorities to pull through the adverse internal and external financial circumstances. However, Deputy Prime Minister Hyun Oh-seok and Financial Services Commission Chairman Shin Je-yun are suffering declining public confidence in the wake of the massive leak of customer data in the three top credit card companies. Bank of Korea Governor Kim Choong-soo will be ending his term of office at the end of March. Disorderly mood can send adverse signals to the market. Though some call for replacement of the government`s economic team including Hyun and Shin, this is not the right time considering that at least two months are needed from nomination of successors to parliament hearings. Against this backdrop, Hyun, Shin and Kim should display strong economic leadership and come up with timely measures to respond to drastically changing global conditions.
At an open forum hosted by Korea Economic Research Institute Tuesday, attendants said one of the problems Korea is facing is a "political failure" where political ideology overwhelms economic ideology. With ominous signs of the third global economic crisis spreading, Korea`s economic and political leaders should display leadership while ensuring that politics put priority on national interest and happiness of ordinary people.