South Korea exec says global recovery faces increased risk

September 12, 2010

The global economy faces increased risk to its recovery as growth slows in the US and China, and Japan battles the yen’s appreciation, South Korean Finance Minister Yoon Jeung Hyun said.

“We’re seeing some unexpected troubles in major economies,” Yoon said. “Their policy focus has shifted from exit policy to sustaining the economic-recovery momentum with fiscal consolidation.” Yoon made his comments at a September 10 media seminar in Icheon, southeast of Seoul.

He said the uncertain global outlook calls for a balanced approach by South Korea’s government between exit policy and recovery, even as domestic economic indicators excepting the property market show strength.

Yoon echoed Bank of Korea Governor Kim Choong Soo’s cautious view on the economic outlook after the central bank unexpectedly left its benchmark interest rate at 2.25 percent on September 9, a sign of concern that slowing external demand will hurt exports in Asia’s fourth-biggest economy.

South Korean officials joined counterparts in Australia and Japan last week in flagging worries about the strength of the global recovery amid elevated US unemployment and potential losses at European banks. At the same time, any prolonged delay in raising the nation’s borrowing costs may risk faster inflation.

Japan’s government rolled out an $11-billion stimulus package last week to shelter the world’s second-biggest economy from slower global growth and the yen’s climb to a 15-year high against the dollar.

Cooling global growth has soured prospects for the trade gains that propelled South Korea’s economy to its fastest first-half expansion in a decade. A possible US slowdown and persistent European fiscal problems are risks to economic growth, the central bank said in a statement after the rate decision. –(Bloomberg News)