Positive projections regarding Korea’s 2012 economy are drawing interest amid the looming gloomy outlook over major Asian economies.
Though the optimists shared the view that Korea could also see a slowdown in economic growth this year, they say the damage would be relatively minimal as the nation’s fundamentals remain competitive.
Among the economists positive about the nation’s economy is Anoop Singh, director for the Asia-Pacific department of the International Monetary Fund.
Korea’s fundamentals both in terms of economic conditions and the financial market are strong, Singh told a recent news conference.
Though the IMF revised its prediction on Korea’s 2012 gross domestic product growth down to 3.5 percent from its earlier estimate of 4.4, he said the downward figure comes in consideration of negative indices in Europe and Japan.
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Bank of Korea Gov. Kim Choong-soo (center) poses with presidents of the nation’s major banks at a meeting to discuss Korea’s economic trends at the central bank’s headquarters in Seoul on Friday. (Kim Myung-sub/The Korea Herald) |
It seems that a certain degree of slowdown is inevitable due to the global difficulties as Korea is an open economy, he said.
But he stressed that the nation has relatively favorable conditions which would support economic growth.
The nation’s financial markets have been shifting back to normal faster than predicted after suffering a series of shocks sparked last September by fears of a global recession.
Investor sentiment, though still cautious, is steadily turning positive, with the market indicators signaling that the worst may be over.
At a press conference, Frederic Neumann, co-head of Asia research team at HSBC, said that credit rating agencies should raise their sovereign credit ratings of Korea to better reflect its improved ability to finance external debt.
Commenting on Korea having the same rating as Italy at Standard & Poor’s and Fitch Ratings, the Hong Kong-based economist said the ratings shared by the two at those agencies do not accurately reflect their default risk.
“What has changed is the financial vulnerability of Korea,” he said.
“Less reliance on external debt, more foreign exchange reserves, and much lower reliance on wholesale funding equips the market with less need for government support should there be a financial crisis.”
In December, Standard & Poor’s said it has confirmed its sovereign credit rating for Korea at the current level of “A,” citing the nation’s fiscal soundness and its net external creditor position.
Fitch Ratings has raised Korea’s sovereign credit outlook to “positive” from “stable” and kept it’s “A+” rating amid signs of improving economic fundamentals.
On the contrary, some economists issued the possibility that Korea’s economic growth could be undermined by the gloomy indices of major Asian countries such as China and Japan.
By Kim Yon-se (
kys@heraldcorp.com)
