The International Monetary Fund has taken a wait-and-see position over some global investors’ view that Korea’s financial market, including the two major bourses, has become safe to invest in.
In its assessment on the Korean economy released on Friday, the Washington, D.C.-based organization said the country “has emerged as a safe haven of sorts in the summer’s market turmoil.”
The IMF acknowledged that low inflation and ample foreign exchange reserves have strengthened Korea’s attractiveness to risk-averse investors. But it added that “the robustness of this new safe haven status (in the stock or bond markets) has not been tested.”
Further, it stressed that “risks are on the downside” over the Korean economy, saying that the global environment is full of risks.
Though the IMF said Korea is unlikely to be very affected by further mild turmoil from U.S. monetary policy normalization, it clarified that possible “adverse growth surprises in any of its main export markets ― China, the U.S. and the EU ― or more severe market stress would significantly damage its outlook.”
Despite a supplementary budget and a cut in the Bank of Korea’s benchmark interest rate to 2.5 percent, domestic demand remains relatively weak, it added.
It also projected that rapidly aging population would be a drag on Korea’s growth potential.
