Too Early for Panic in Seoul
South Korea faces a triple whammy of slowing economic growth, falling exports and weakening consumer demand. But it's still too early for Seoul to hit the panic button.</br></br>Thursday's economic data were weak--seasonally adjusted gross domestic product in the fourth quarter was up just 0.4% from the previous period, the slowest rate of growth since 2009 and below market expectations. More data due soon will also likely disappoint--the country may run its first trade deficit in two years in January.</br></br>With parliamentary and presidential elections later this year, the temptation to act swiftly will loom large. But knee-jerk policy steps would be foolish.</br></br>There is room for the Bank of Korea to cut interest rates if there is a sharp economic decline. Most analysts believe the central bank will deliver. The BOK considers its policy rate to be accommodative at 3.25%. Still, a cut of 0.25 percentage point could come as early as the first quarter of 2012. That should bolster consumer sentiment. But any gains could be offset if the won falls, stoking higher prices for important imports of energy and food.</br></br>Beyond that, further stimulus would be mistaken. The government has already front-loaded its 2012 budget to bring spending forward. Back in 2009, it also introduced a supplementary budget to boost the economy. Repeating that step now could also lead to inflationary pressures that would only crimp domestic spending.