Economy faces risks despite recent pickup

Korea‘s economy still faces many uncertainties despite its recent rebound, a government report said Tuesday, urging more efforts to achieve a “sustained” recovery by coping with lingering downside risks at home and abroad.

Debt problems in advanced nations, growing inflationary pressure in emerging countries and unrest in the Middle East are cited as downside factors that could weigh on the Korean economy, according to the report by the Ministry of Strategy and Finance.

“Although, economic recoveries in the U.S. and the world are gaining momentum, there are still danger factors, such as debt problems in advanced nations along with inflation in emerging countries and instability in the Middle East,” the report said.

“Korea needs to conduct its macroeconomic policy in a way that it can attain a sustained economic recovery while keeping prices under control. It also has to keep making efforts to brace itself for such danger factors lingering at home and abroad,” the report added.

The assessment echoed concerns recently voiced by government officials over growing inflationary pressure amid high oil, food and commodity prices. They worry that price instability could undercut the nation’s fast but still fragile economic recovery.

On Jan. 13, the government unveiled a series of anti-inflation measures that include freezes on college tuitions and public service prices during the first half of this year. It also decided to lower import tariffs on pork and other raw materials in a bid to lower food prices here.

The report said the government should closely monitor the market to see if those measures are being carried out, adding it will also have to consider additional measures if necessary to stem inflation caused by supply mismatches.

The report came after Korea‘s economy grew 6.1 percent last year from the previous year’s 0.2 percent expansion. The 2010 growth marked the highest in eight years.

The government remains optimistic about the nation‘s economic outlook, predicting that the economy will grow about 5 percent this year, driven by robust exports and investment by the private sector.

Experts, however, express caution, saying that high oil and commodity prices could weigh on business sentiment as more costs of purchasing key production materials could dent their profitability down the road. 

(Yonhap News)