ID :
22925
Mon, 10/06/2008 - 21:05
Auther :
Shortlink :
http://m.oananews.org//node/22925
The shortlink copeid
Global financial crisis to affect economic growth: gov't
By Lee Joon-seung
SEOUL, Oct. 6 (Yonhap) -- The global financial crisis is expected to cause economic growth to fall below the upper 4 percent range predicted earlier in the year, the government said Monday.
In a report to the National Assembly, the Ministry of Strategy and Finance said
fallout from the Lehman Brothers bankruptcy in mid September may last for some
time and hurt economies around the world.
The Lee Myung-bak administration, which took office in February, had pledged 7
percent growth during its election campaign last year, but had lowered this to
the upper 4 percent range to reflect unfavorable developments.
The report said that after pulling off 5.3 percent growth in the first half,
gains will likely dip to 4 percent between July and December.
South Korea, which has maintained a trade surplus for the past decade, reported a
deficit of US$12.6 billion in the first eight months of this year, while its
external debts reached $419.8 billion as of June, from $382.2 billion last year.
The top economic policymaking ministry also said Seoul plans to take all
necessary steps to prevent the domestic financial market from being seriously
affected by any liquidity crunch. It said measures including speedy
implementation of broad tax cuts and government spending plans should help
breathe life into the sluggish economy.
Finance Minister Kang Man-soo, meanwhile, told lawmakers that troubles rocking
the financial sector are affecting the global economy as a whole and hurting
consumer sentiment and business investment.
"When the Lee administration took power, it tried to rectify inherent problems in
the balance of trade that were starting to be felt, but the Lehman Brothers
bankruptcy and the subsequent liquidity crunch have hindered any meaningful
countermeasures from taking effect," the policymaker claimed.
On possible contingency plans to stabilize the foreign exchange market, Kang said
that for now Seoul is carefully monitoring all developments.
"At present the government is just monitoring developments and taking limited
actions, but this could change to more solid forms of intervention if the market
mechanism no longer functions properly," he said.
The South Korean currency closed at 1,269 won to the greenback at the end of
trading, down 45.5 won from the previous session. The won has fallen more than 26
percent versus the dollar so far this year.
The minister then said without going into details that an understanding has been
reached by the Bank of Korea to use the country's foreign exchange reserves to
stem any sudden drop in the value of the Korean won against the U.S. dollar,
which can fuel inflationary concerns.
"Precautions must be made to save every dollar, but the country should not loose
an opportunity to stabilize the economy by being overly careful," he said.
South Korea's foreign exchange reserves reached US$239.7 billion at the end of
September, down by $3.53 billion from a month before.
Kang claimed that if the country succeeds in preventing financial uncertainties
from spilling over into other economic activities, growth should make a comeback
in the second half of 2009.
The policymaker added that a recent drop in home prices will not result in the
financial complications that have occurred in the United States as a result of
the sub-prime mortgage loan crisis.
"The loan-to-value rate in South Korea was set at 40-50 percent of the value of
homes, compared to 90 percent in the United States," he said, stressing that
banks would not be hurt unless prices plummeted.
He, however, hinted that project financing that went to construction companies
that are facing difficult times, needed to be checked with contingency being
pursued as soon as possible to stem any fallouts.
There are over 138,000 empty apartment homes nationwide that have not been sold
so far that are causing problems for contractors who have borrowed money to
construct the buildings.
The finance minister added that since current stock market conditions were
unfavorable, there may be a need to readjust the timetable for the sale of
state-run Korea Development Bank.
"Since the government may not be able to get a good price a readjustment on the
sale could be made," he said.
Under the original plan, Seoul said it plans to start reducing its 100 percent
stake in KDB next year and fully privatize it by 2012 through share and private
sales.
SEOUL, Oct. 6 (Yonhap) -- The global financial crisis is expected to cause economic growth to fall below the upper 4 percent range predicted earlier in the year, the government said Monday.
In a report to the National Assembly, the Ministry of Strategy and Finance said
fallout from the Lehman Brothers bankruptcy in mid September may last for some
time and hurt economies around the world.
The Lee Myung-bak administration, which took office in February, had pledged 7
percent growth during its election campaign last year, but had lowered this to
the upper 4 percent range to reflect unfavorable developments.
The report said that after pulling off 5.3 percent growth in the first half,
gains will likely dip to 4 percent between July and December.
South Korea, which has maintained a trade surplus for the past decade, reported a
deficit of US$12.6 billion in the first eight months of this year, while its
external debts reached $419.8 billion as of June, from $382.2 billion last year.
The top economic policymaking ministry also said Seoul plans to take all
necessary steps to prevent the domestic financial market from being seriously
affected by any liquidity crunch. It said measures including speedy
implementation of broad tax cuts and government spending plans should help
breathe life into the sluggish economy.
Finance Minister Kang Man-soo, meanwhile, told lawmakers that troubles rocking
the financial sector are affecting the global economy as a whole and hurting
consumer sentiment and business investment.
"When the Lee administration took power, it tried to rectify inherent problems in
the balance of trade that were starting to be felt, but the Lehman Brothers
bankruptcy and the subsequent liquidity crunch have hindered any meaningful
countermeasures from taking effect," the policymaker claimed.
On possible contingency plans to stabilize the foreign exchange market, Kang said
that for now Seoul is carefully monitoring all developments.
"At present the government is just monitoring developments and taking limited
actions, but this could change to more solid forms of intervention if the market
mechanism no longer functions properly," he said.
The South Korean currency closed at 1,269 won to the greenback at the end of
trading, down 45.5 won from the previous session. The won has fallen more than 26
percent versus the dollar so far this year.
The minister then said without going into details that an understanding has been
reached by the Bank of Korea to use the country's foreign exchange reserves to
stem any sudden drop in the value of the Korean won against the U.S. dollar,
which can fuel inflationary concerns.
"Precautions must be made to save every dollar, but the country should not loose
an opportunity to stabilize the economy by being overly careful," he said.
South Korea's foreign exchange reserves reached US$239.7 billion at the end of
September, down by $3.53 billion from a month before.
Kang claimed that if the country succeeds in preventing financial uncertainties
from spilling over into other economic activities, growth should make a comeback
in the second half of 2009.
The policymaker added that a recent drop in home prices will not result in the
financial complications that have occurred in the United States as a result of
the sub-prime mortgage loan crisis.
"The loan-to-value rate in South Korea was set at 40-50 percent of the value of
homes, compared to 90 percent in the United States," he said, stressing that
banks would not be hurt unless prices plummeted.
He, however, hinted that project financing that went to construction companies
that are facing difficult times, needed to be checked with contingency being
pursued as soon as possible to stem any fallouts.
There are over 138,000 empty apartment homes nationwide that have not been sold
so far that are causing problems for contractors who have borrowed money to
construct the buildings.
The finance minister added that since current stock market conditions were
unfavorable, there may be a need to readjust the timetable for the sale of
state-run Korea Development Bank.
"Since the government may not be able to get a good price a readjustment on the
sale could be made," he said.
Under the original plan, Seoul said it plans to start reducing its 100 percent
stake in KDB next year and fully privatize it by 2012 through share and private
sales.
