Finance Minister Yoo Il-ho said that South Korea’s national debt in proportion to its gross domestic product is relatively low compared with other major economies.
Finance Minister Yoo Il-ho (Yonhap)
Its largest trading partner China, which is undergoing structural changes to focus on spurring domestic consumption rather than exports, will have a positive effect on Asia’s fourth-largest economy. Korea’s benchmark interest rate of 1.5 percent is also higher than most other economies, he noted.
“Korea has the capability to implement sound fiscal and monetary policies to buffer the economy from external shocks and uncertainties,” he said in a conference in New York on Tuesday local time.
In a bid to alleviate concerns and deal with negative press about the strength of the Korean economy, Yoo briefed foreign investors and the media that Korea is not a “tiger without teeth.”
He continued to explain that Korea’s fundamentals remain strong, noting its current account surpluses and abundant foreign exchange reserves in the face of negative and downgraded outlooks.
The International Monetary Fund lowered Korea’s growth forecast from 3.2 percent to 2.7 percent this year on slow global economy. It expects the global economy to grow 3.2 percent this year, down from its initial outlook of 3.4 percent, citing aging society and rising debt stemming from expansionary monetary policies in advanced economies and slower demand in China. The IMF’s forecast for the Korean economy next year is 2.9 percent.
Finance Minister Yoo told foreign investors that Korea will be able to grow 3 percent this year, noting that confidence in production and exports is improving following measures to boost consumption and jobs early this year.
However, with high household debt and increasing global volatility, Korea’s economy does stand at a crossroads, the minister said.
“The Korean government is most concerned with debt of low-income group,” he said.
“We do no deny that household debt is high, but it will have limited impact on the economy.”
The government will continue to strengthen its policy support for the low-income families to help them to repay their loans.
Yoo also said that North Korea does pose a challenge to South Korea, but this will have limited effect on the South Korea economy, adding that the government is doing all it can to minimize geopolitical risks in the region.
Also, Korea will push forward with reforms in labor, education, finance and public administration to structurally improve the economy.
By Park Hyong-ki (firstname.lastname@example.org)