SEJONG (Yonhap News) ― The gridlock surrounding deficit reduction and other fiscal issues in the United States continues to serve as a downside risk to the global economy, the finance ministry here said Thursday.
The U.S. Congress and political leaders have been in a stalemate over how to resolve their deficit reduction problems. A failure to reach a compromise led to the automatic across-the-board budget cuts known in the market as a “sequester.”
A failure in passing a budget this month could result in a government shutdown. Uncertainty over raising its debt ceiling is also looming large.
The ministry noted in a report that the sequester that kicked in early this month does not have a significant impact on the market as it has been well expected, and somehow the political community there is expected to reach a compromise to ease the cuts.
Talks on the budget and debt ceiling, however, will likely deepen the overall uncertainty for the global economy as it is feared they will not reach a resolution due to differences over the issues along the political lines.
The ministry said that it is still too early to predict what impact such a gridlock in the U.S. would have on the Korean economy but a prolonged stalemate could “negatively” affect the economy through “financial and trade channels.”
The ministry noted that it is closely monitoring the market to brace for possible implications of the fiscal uncertainty in the U.S. on the global and domestic economies.
