[Column] The Real Issue Is the Exchange Rate

Jongseong Cho, CEO of Korea National Research Institute

The thermometer that measures the fundamental strength of the economy always speaks in numbers.

Among these, the exchange rate is the most sensitive indicator reflecting the fundamentals of the Korean economy, which is highly dependent on external factors.

The recent trend of persistently high exchange rates is emerging not merely as volatility but as a sign of a complex crisis that is putting pressure on the entire real economy.

As import prices soar, the cost burden on companies has reached a critical point, and household sentiment is rapidly freezing.

If one were to identify the most painful aspect of the Korean economy today, it would undoubtedly be the exchange rate.

The old formula that a high exchange rate boosts export competitiveness has now reached the end of its useful life.

In a structure that relies entirely on external supply chains for energy, raw materials, and food, a decline in the value of the Korean won immediately triggers a broad-based rise in prices.

Companies inevitably pass on the increased cost burden to final prices, and the damage is directly transferred to consumers.

The era when improvements in the accounting figures of certain large export companies translated into a healthy national economy is over.

An even greater issue is the direction and credibility of policy. Attributing the rise in the exchange rate solely to external factors, such as the global strength of the dollar, is only "half the truth."

If the depreciation of the Korean won against major currencies is particularly steep, it means that the fundamental strength of our economy and the capacity for policy response are being tested by the market.

The foreign exchange market moves more on trust than on indicators.

Inconsistent messages and ambiguous responses from the authorities only serve as negative factors that increase market uncertainty.

A high exchange rate is like a "regressive tax" that is imposed most harshly on the socially vulnerable.

For ordinary people, small business owners, and those on fixed incomes who lack the means to prepare, rising prices and interest rate burdens are matters of survival.

When real income remains stagnant while living costs and loan interest rates soar, this reality acts as a mechanism that deepens social polarization.

Ultimately, neglecting the exchange rate issue is no different from ignoring the suffering of the people.

Jongseong Cho, CEO of Korea National Research Institute