South Korea's economic fundamentals enabled the country to overcome the recent global financial crisis, but it now needs structural reforms to ride over the era of low growth, the head of Euro Group said Thursday.
"Years of quite low growth have marked some structural weaknesses, and a number of serious challenges still lie ahead, such as aging and globalization," Jeroen Dijsselbloem, the chairman of the Euro Group, said at a Seoul forum. "Implementing the right reforms can boost the growth."
Euro Group is a gathering of eurozone finance ministers.
Dijsselbloem said South Korea and Europe both have to deal with the extension of the retirement age and costs of health care as labor forces get older. The two regions are required to search for a new growth engine to boost the economy as the world is experiencing persistent low growth.
"Korea and Europe have stood in a seemingly unstoppable storm during the last decade. Though we did not fall, it is necessary that we change our form," the Dutch finance minister said. "It's not easy to switch into the new approach, especially when you know the success in the past. Yet, it can be done."
Dijsselbloem named the national pension system as the most important in order for a country to maintain domestic consumption over a certain level in the long run.
"We have to take real estate and house prices into account," he said. "You have to make sure that households, or common people, working people, are able to afford a house and able to build up a pension or to have a pension."
The government's policy has to focus on helping ordinary people hold purchasing power throughout their lives and reserve money for their pension system, he said.
The Euro Group chairman said the downside trend of oil prices is a boon to European countries, which have been struggling for years since the 2008 financial crisis, as they will trigger depreciation of the euro and push up domestic demand in 28 eurozone countries.
The European Central Bank, he said, is also expected to fuel the move, coming up soon with an expanded monetary policy.
He hailed the free trade agreement between South Korea and the European Union, which took effect three years ago, calling it "crucial elements in finding more new potential growth."
"I am very much in favor of this trade agreement," he said. "I strongly believe in international trade, and I think it can improve both of our economies."
According to recent data, South Korea suffered a trade deficit of $10.17 billion with the EU as of Dec. 20 last year, up from a shortfall of $7.37 billion in 2013 and $970 million in 2012. Asia's fourth-largest economy had enjoyed a trade surplus with the EU until 2011. (Yonhap)
