By Na Jeong-ju
Staff Reporter
The plunge in the value of the local currency is pushing up costs for households as well as many firms that are heavily dependent on imports for local and overseas sales.
The rise in import prices will also raise pressure on corporations to cut payrolls as part of cost-saving measures, providing a setback to the already sluggish job market, analysts said Sunday.
Top policymakers declared last week that the economy has entered a downward spiral, haunted by a number of external negatives, such as rising oil prices and fears about a global slowdown. The Bank of Korea (BOK) also cut its forecast of this year's economic growth to 4.5 percent from the previous 4.7 percent.
Some government officials say the won's depreciation will help spur export growth and bodes well for the country's drive to explore more overseas markets. However, critics argue a weaker won will have some serious consequences, domestically.
``If the won continues to fall against the dollar, firms will hesitate to sell the U.S. currency they earn from global sales on expectations that the won will lose ground further,'' a currency dealer at Woori Bank said. ``On the other hand, import firms will move quickly to secure more dollars to settle their transactions with foreign partners, adding pressure on the won's fall.''
The won's weakness is also adding a financial burden for many parents paying tuition fees for their children studying overseas.
Over the past six months, the currency has fallen 19.1 percent against the Japanese yen, 17 percent against euro and 12.6 percent against the Australian dollar as it shed more than 8 percent against the U.S. dollar.
``Last November, 4.92 million won was enough to send 40,000 yuan to my daughter studying in Beijing. However, I paid 5.96 million won for the same amount of the Chinese currency a couple of days ago,'' said Kwon Sun-ae, a housewife in Anyang, Gyeonggi Province.
Canada, Australia and New Zealand are among the most favored destinations for Korean students who want to study English abroad. Koreans tend to choose the countries because their education services are cheaper than those in the United States. However, they have been losing merit as their currencies have gained strength in recent months.
Currency dealers forecast the won will continue to lose ground for the time being amid the greenback's global strength. On Thursday, the Korean currency shed 23.5 won to close at 1,049.6 won per dollar, its weakest level in more than 30 months.
Analysts say a weaker won will raise import costs for Korean firms amid rising international prices of crude oil and other raw materials. On Thursday, BOK Governor Lee Seong-tae cited the won's sharp fall as one of the key drivers of soaring inflation.