A Korean delegation, led by Deputy Prime Minister Choi Sang-mok, will participate in the 24th Annual Meeting of the Boards of Governors of the International Monetary Fund (IMF) and World Bank Group (WBG), to be held in Washington DC from Oct. 25 to Oct. 26.
The delegates include Chairman Yang Jong-hee of KB Financial Group, Chairman Jin Ok-dong of Shinhan Financial Group, Chairman Ham Young-joo of Hana Financial Group and Chairman Lee Suk-joon of NH NongHyup Financial Group, as well as heads of other financial institutions.
The Meetings bring together central bankers, ministers of finance and development, private sector executives, civil society, media and academics to discuss issues of global concern, including the world economic outlook, global financial stability, poverty eradication, inclusive economic growth and job creation, climate change, and others.
FTSE Russell’s World Gov’t Bond Index is One of World’s Top Three Bond Indexes
On Oct. 8, FTSE Russell announced the “FTSE Fixed Income Country Classification Announcement, October 2024.” In this classification, FTSE Russell revealed its plan to include Korea in the World Government Bond Index.
FTSE Russell noted, “Since being placed on the FTSE Fixed Income Country Classification Watch List in September 2022, several initiatives intended to improve the accessibility of South Korean government bonds for international investors have been implemented by South Korean market authorities, which have facilitated the fulfilment of the criteria for a Market Accessibility Level of 2.”
FTSE Russell highlighted that the Korean government completed significant improvements in its foreign exchange (FX) market structure, including allowing third-party FX transactions and extending FX trading hours (July 2024); in addition, the government opened an omnibus account for government bonds linked with the international central securities depositories (June 2024) and continuously worked on resolving challenges related to tax exemptions and the Legal Entity Identifier (LEI).
Furthermore, FTSE Russell spoke highly of Korea’s implementation of institutional reforms to meet the stringent requirements for inclusion in the WGBI, along with the government’s ongoing endeavors to actively address the practical feedback of global bond investors to promote and expand international investment.
“FTSE Russell congratulates the South Korean MOEF on its efforts to expand and encourage global investment in its local government bond market by implementing changes that have met the rigorous criteria for WGBI inclusion, as well as its ongoing commitment to addressing the practical feedback of international bond investors participating in its evolved market structure,” an official said.
FTSE Russell announced that following the decision to include Korea in the WGBI, the actual reflection of Korea in the index will commence in November 2025. The process will be carried out gradually over a year, with quarterly increases in Korea’s weight within the index.
As of October 2024, Korea’s projected weight in the index is 2.22 percent, ranking as the 9th largest among the included countries.
FTSE Russell has planned its phased approach to provide global market participants ample time to prepare for Korea’s inclusion; the Korean government bonds will be included in the index profiles one year after the announcement, and the inclusion ratio will gradually increase over the course of the following year.
FTSE Russell has also noted that it will continue to conduct an annual review of government bond markets, with the Fixed Income Country Classification published in March.
Deputy Prime Minister Choi Sang-mok welcomed FTSE Russell’s decision to include Korea in the WGBI.
He pointed out that this reflects the global financial market’s confidence in Korea’s solid economic fundamentals, fiscal soundness, and the policy direction pursued over the past two years under the current government.
He reiterated the government’s commitment to ensuring Korea’s smooth inclusion into the WGBI by reviewing and upgrading relevant systems, as well as maintaining open communication with global investors.
Also, the government will monitor market conditions, particularly in response to global financial market fluctuations, and will manage any potential risks with vigilance.
All Ministries and Agencies Strive to Work to Inject Vitality into Investment
Deputy Prime Minister Choi Sang-mok convened the Ministerial Meeting on Economic Affairs at the Government Complex-Seoul on Oct. 16, to discuss the following agenda items, including the current status of employment for September 2024 and the progress of the “Semiconductor Ecosystem Support Package” and future plans.
Deputy Prime Minister Choi said, “Although domestic constraints, such as inflation and financial burdens are gradually easing, the overall sentiment in the economy remains challenging.”
“Under these circumstances, the government will accelerate the implementation of the domestic recovery measures in areas such as corporate investment, construction investment, and private consumption, which were devised earlier this month,” Deputy Prime Minister Choi said.
“In particular, visits will be made to the frontlines of the economy to listen to voices on the ground, and based on such opinions, policy tasks aimed at improving domestic demand and people’s livelihoods will continue to be refined.”
Consumer Price Index: September 2024
The Consumer Price Index was 114.65 (2020=100) in September 2024. The index increased 0.1 percent from the preceding month and rose 1.6 percent from the same month of the previous year.
The index, excluding food and energy, was 111.18 in September 2024. The index decreased 0.2 percent from the preceding month and rose 2 percent from the same month of the previous year.
The Consumer Price Index in September 2024 for Food and non-alcoholic beverages increased 1.4 percent. Housing, water, electricity, gas and other fuel prices increased 1.3 percent.
For health, prices increased 0.1 percent. Education-related expenses increases 0.1 percent from the preceding month.
The index for Alcoholic beverages and tobacco; Furnishings, household equipment and routine maintenance; Transport; Recreation and culture; restaurants and hotels; and Miscellaneous goods and services decreased 0.1 percent, 0.3 percent, 2.0 percent, 0.4 percent, 0.5 percent, and 0.2 percent from the preceding month, respectively.
Entire Industry Production Rises by 1.2% in August
In August 2024, the industry production saw an increase of 1.2%, as the manufacturing sector rebounded sharply by 4.1%, driven by the resolution of temporary factors from the previous month, such as an automobile parts industry strike.
The service sector also saw a modest increase of 0.2%, a rise for the third consecutive month.
Retail sales rebounded by 1.7%, led by improvements in durable goods sales (1.2%), thanks to the recovery in passenger car sales, and a rise in non-durable goods sales (2.7%) like food and beverages.
Although facilities investment fell by 5.4%, following a sharp rise of 10.2% the previous month, it still showed strong growth in the second half of the year (July to August), with a mid-8% range increase compared to the second quarter.
Construction investment moved down slightly by 1.2%, with a growth in civil engineering (2.4%) but a decline in building construction (-2.4%).
In August 2024, industrial activity showed signs of improvements in key production sectors, moving beyond previous anomalies.
In particular, manufacturing output went up in various industries, including automobiles, machinery and equipment, petroleum refining, and primary metals, with 17 out of 28 manufacturing sectors experiencing growth.
Exports in September are expected to mark a 12th consecutive month of growth, indicating ongoing recovery in the export and manufacturing sectors.
In the domestic market, visible signs of recovery in facility investment are emerging, while the service sector continues to show improvement, particularly with a 4.4% growth in accommodation and food services.
Retail sales also rebounded; however, the construction sector saw a drop, highlighting the ongoing differences in the pace of recovery across sectors.
The government plans to accelerate domestic recovery by swiftly implementing key policies aimed at achieving people’s livelihoods stability, such as temporary investment tax credits, supplying 110,000 units of newly constructed rental housing, reinforcing investments in public institutions, and injecting 25 trillion won in support for small businesses.
It also commits to providing tailored policy measures for each sector, including investment, construction, and consumption., Meeting on Macroeconomic and Financial Stability
On Sept. 19, Deputy Prime Minister Choi held an emergency meeting on macroeconomic and financial stability with related institutions to assess the impact of the decision by the U.S.’s Federal Open Market Committee (FOMC) to cut the benchmark interest rate on domestic and international markets and to discuss response measures.
The following are key messages of DPM Choi’s remarks. Last night, the U.S. Federal Reserve (Fed) decided to cut the benchmark interest rate by 50 bp (a range of 4.75%-5.0%) during the FOMC meeting, marking the first rate cut in four years and six months since March 2020.
The Fed revised its outlook for future rate cuts, increasing its projection for this year’s reduction from 25 bp to 100 basis points, and for next year from 125 bp to 200 basis points.
While the Fed lowered its inflation forecast, it raised the unemployment rate projections and emphasized its strong commitment to supporting full employment.
During a press conference, Chair Jerome Powell explained that the 50 bp cut was based on additional data since the July meeting.
He also noted that the Fed could speed up or slow down the rate of cuts if necessary, and could even pause if deemed appropriate.
Global financial markets responded relatively calmly to the rate cut, as expectations for such a move had already been partly priced in.
