[ed] A New Financial Turmoil?

Seoul should prevent contagion of Russian crisis

It's unlikely that the financial troubles currently afflicting Russia will affect Korea directly. However, that does not mean the Seoul government can just look indifferently at the currency crisis in Moscow.

If the ruble's plunge affects the currencies of other emerging economies in a big way, or the plummeting global oil prices further dampens the already deflationary European economy, the financial turmoil will no longer just be a proverbial fire on the other side of the river for Korea

It comes as a relief then that economic officials seem to be doing exactly what they should be doing ?keeping a close watch on the developments in the global financial markets and planning steps to stem any possible side effects. Foreigners may say that Korea is like a burnt child dreading the fire, but Seoul cannot be too cautious against repeating the nightmare of 1998.

Granted, overreaction is unwarranted, given the rather negligible share that the Russian economy has on the global scale, as well as the minor amount of commodity trade and financial transactions between Seoul and Moscow. Still, the current situation is eerily reminiscent of 16 years ago.

Some emerging economies, such as Venezuela, if not Russia, may default, as a few Southeast Asian countries did in the late 1990s.

Then, as now, the US dollar was regaining strength while the Japanese yen has fallen to its lowest level in years.

This means that foreign capital will flow out of Korea while the nation's key industries, including automobiles, electronics and petrochemicals, lose their market share to both the rapidly chasing Chinese exporters and newly competitive Japanese rivals armed with a weak currency. All this comes on top of the nation's snowballing debt owed by both the government and households.

Of course, Korea is not...