South Korea may change its economic policy depending on developments surrounding North Korea's nuclear test, a government official said Wednesday.
"We aren't considering any immediate step regarding North Korea's nuclear test... but we can adjust economic policy depending on how things develop," Cho Won-dong, director general of the Finance Ministry's economic policy division, said in an interview with a radio program.
The official said the government will reflect such risks related to the North's nuke test into next year's economic policy plan.
"If necessary, we may consider economy-boosting measures," Cho said. Last month, Finance Minister Kwon O-kyu said the government may re-balance its stance on macroeconomic policies, adding that there will be more room for economic policy implementation next year.
His remarks were interpreted as indicating that the South Korean government may implement economy-boosting measures next year, should the economic slowdown be greater than expected.
"Global rating agencies have said that Pyongyang's atomic bomb test has no impact on South Korea's sovereign rating, but we can say that this is guaranteed," Cho said. Ratings firms said that depending on developments changes may be made down the road.
In addition to contemplating possible economic stimulus measures, the finance ministry said it is trying to determine the best time to issue its foreign exchange stabilization bonds this year. Seoul had planned to issue US$1 billion worth of the stabilization bonds in October to help stabilize foreign exchange rates.
"The October date was set before the nuclear test, which is forcing us to make changes," said a mid-level policymaker. He said the ministry was keeping close tabs on the global market and movement of exchange rates.
The North's unprecedented atomic test came at a time when the South Korean economy, Asia's fourth largest, is expected to grow around 5 percent this year.
But high oil prices and a firmer won versus the U.S. dollar are causing concerns that economic growth may fall sharply in the second half of the year.
The nation's economic growth cooled to 0.8 percent in the second quarter, the slowest pace in more than a year, as the construction sector remained slow and consumer spending slackened.
Next year, economic growth is forecast to slow to around 4.6 percent on a slowdown in the global economy, although some economic think tanks are predicting that it could fall to around 4 percent.
On Tuesday, Lehman Brothers Holdings Inc. said it may cut its estimate for economic growth in South Korea next year because increased uncertainty after North Korea's nuclear test claim may sap business and consumer confidence.
Reflecting this view, local economists said the fallout from the test could last for some time due to uncertainty about the future.
They said the level of sanctions that the international community meted out to Pyongyang and the latter's reaction could cause trouble for the economy. In the worst case, tension could drive away foreign investment, hurt domestic spending and even impact exports in the long run if foreign buyers are concerned about the developments taking place on the Korean Peninsula.
Merrill Lynch, however, said in a recent report that there is little possibility of North Korea's nuclear test hurting the South Korean economy.
The U.S.-based financial company said exports will remain strong, while domestic consumption is unlikely to suffer a drastic slump.
Merrill Lynch predicted a 5.1-percent growth rate and a 4.3-percent gain, respectively, for this year and next year.
Seoul, Oct. 11 (Yonhap News)
Seoul may adjust economic policy on Pyongyang's nuclear test |
