Recent reports indicate South Korea’s economic recovery from the global financial crisis that hit the country late last year and further intensified by the disaster with exports and manufacturing output improving and consumer prices comparatively steady as reported by the finance ministry. According to the Ministry of Economy and Finance Green Book – a monthly economic report – the hint is also pointing to the upward movement of the domestic demand, facilitated by the facility investment as well as the service industry.
Minister of Finance South Korea Choi Sang-mok said that the country’s economy has a tendency for the restoration as the consumer prices show signs of stabilization. This positive outlook comes at a time when the country strives to manage effects of the global economic crisis such as the COVID 19 pandemic and geopolitical risk.
Another realisation is that South Korea’s export sector is one of the leading subsectors supporting economic recovery. The latest figures available reveal that exports increased by 24.6% from the corresponding period of last fiscal in the first ten days of September mainly because of global demand for semiconductor products. This increase in export is very essential to the export based economy since it works as economic buffer to other loss making sectors or areas.
The electronics industry, the most vital for South Korea’s economy, remains an important factor to the performance of the economy. However, the sector is not without its problems, which, as seen via the plunge in the recent days of SK Hynix after being downgraded by Morgan Stanley. This show that the industry is volatile and that the country needs to diversify its economy in order to support this unreliable industry.
Due to the changes that have occurred in the economic environment of this country, the South Korean government is making efforts to sustain and develop it. Finance Minister Choi has promised cooperation with the Bank of Korea and to act quickly if more market supporting steps are required. This commitment comes in the backdrop of recent cut in interest rate by the U.S. Federal Reserve that has some implications on the international financial system.
The Bank of Korea is also paying attention to the situation and base on the analyses the probability of a rate cut in November. This would be done to boost revenues bolster economic expansionary policy target a moderate inflation rate. The central bank has kept its policy rate at 3.5 percent, the highest in approximately 16 years, for 13 straight meetings. However, new structural changes now occurring in the world economy may spur a change in the monetary policy.
Despite this general outlook, or maybe by virtue of it, there are problems. The finance ministry has reported that it has concerns that a faster growth in household borrowing can be a threat to financial balance. Minister Choi has pledged to strengthen the rules for household debts and payment problems with Electronic commerce.
The government of South Korea is also working on other economic structural problems through long-term plans with the aim to solve them entirely. Some of these are measures to increase productivity and innovate, as well as manage through adjustments arising from ageing population and low birth rate. The dedication to technology as well as the stance the country holds in high tech sectors are projected to give pivotal support to economic development in the years ahead.
When realizing these potential economic conditions and opportunities for development, one of the key South Korea’s government’s priorities will be the balance of short-term stabilization and long-term growth plans. In this context, the country’s economic flexibility that has been the primary agents of the accelerate growth during past decades will serve as the major challenges to sustain the status as one of the leading economies in Asia and the whole world.
