Deputy Prime Minister and Minister of Strategy and Finance Yoo Il-ho will participate in the 2016 Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) slated for Oct. 7-9 in Washington, D.C. Deputy Prime Minister Yoo will lead a Korean delegation to the annual meetings.
The delegation includes the governor of the Bank of Korea and heads and representatives of commercial banks, including Kookmin Financial Group, Hana Financial Group, Woori Bank, Shinhan Financial Group, Korea Development Bank, IBK, and NongHyup Financial Group, Korea Eximbank as well as representatives of other financial institutions and the financial industry, including the Korea Financial Investment Association.
The annual meetings bring together central bankers, ministers of finance and development, private sector executives, and academics to discuss progress on the work of the IMF and the World Bank Group.
Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world's financial markets.
Korea Ranks High in Evaluation of G-20 Growth Strategies
Korea held the top rank in the 2016 evaluation of the estimates of G-20 members’ progress towards raising the level of their combined GDP.
In 2014, G-20 member countries worked out growth strategies based on each country’s structural reform measures action plans to raise the level of their combined GDP by 2 percent by 2018.
The IMF and the Organization for Economic Cooperation and Development (OECD) informed each G20 member country of the outcomes of an evaluation of the progress of each country’s policy commitments prior to the 2016 G20 Hangzhou Summit, the MOSF said on Aug. 13. According to the evaluation, Korea saw the progress of the nation’s key policy commitments stand at 96 percent, a whopping 41 percentage points higher than the OECD’s average of 55 percent.
If the labor reform measure, now pending at the National Assembly, is excluded, 25 tasks out of 26 key policy commitments have been completed, and other remaining tasks have been progressing.
Korea placed 2nd by completing 82 percent, or 18 out of 22 key policy commitments, in the 2015 evaluation.
It is difficult to figure out the exact ranking of Korea since other OECD member countries’ figures on the progress of their commitments were not disclosed starting this year, but Korea is assumed to rank at the top considering the nation’s implementation figures, a MOSF official said.
The MIF and OECD analyzed that Korea is forecast to see its GDP surge 43 trillion won between 2014 and 2018 thanks to the implementation of growth strategies. The figure represents an estimated 3.1 percent growth in the nation’s 2018 GDP relative to Korea’s 2013 real GDP forecast based on the reference year of 2005.
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Korea Launches 24-Hour Monitoring Following North Korea’s Nuclear Test
MOSF Vice Minister Choi Sang-mok presided over the Emergency Meeting on the Macro-economy and Financial Market on Sept. 9, following North Korea’s 5th underground nuclear test.
The meeting looked into the effects of the test on the financial market and discussed ways to prevent any possible volatility in the markets.
The stock and FX markets have remained stable since the release of the news, and the impact of the test is expected to be limited given that the market responded calmly after North’s 4th test.
KOSPI, which stood at 2,040.8 at 9:30 am, before the news release, dropped to 2,035.2 at 12:30 pm and 2,030.9 at 01:30 pm. The won/dollar exchange rate, which was traded at 1,097.7 at 9:30 am, before the new release, rose to 1100.1 at 12:30 pm.
However, the government will keep an eye on the financial market as the uncertainties arising from the North’s provocation can add a burden to the country’s external risks, such as the possibility of a Fed rate hike and Brexit.
The government has launched 24-hour monitoring to closely examine internal and external economic developments and financial market movements. The government-wide task force is now operating to swiftly respond to any external uncertainties according to scenario-specific contingency plans. “We will also provide up-to-date information as quickly as possible to international credit agencies, foreign investors and international news agencies and work hard to stabilize investor sentiment,” the MOSF said.
MOSF’s Taking Stock of Public Entities Introducing Annual Merit Salary
MOSF Vice Minister Song Eon-seok presided over the fifth meeting on the progress of public entities’ introduction of an annual merit salary system on Sept. 8.
As of June 10, 120 public entities have introduced an annual merit salary system.
The meeting was designed to take stock of the progress of all public entity preparation for the introduction of an annual merit salary system, rather than the conventional pay system based on the length of employee services.
Exports Grow for 1st Time in 20 Months, While Domestic Consumption Slows
The Korean economy has seen domestic demand weaken as government measures aimed at boosting consumption expired, such as a consumption tax cut on cars, while exports improved due to recovering prices and volume, as well as other temporary factors.
The economy added fewer jobs in July than the previous month (298,000 and 354,000 respectively, year-on-year), despite improving job growth in the service sector. Job growth in the manufacturing sector fell sharply due to restructuring.
Consumer price inflation rose at a slower rate in August compared with the previous month (0.4 percent and 0.7 percent respectively, year-on-year), due to a temporary reduction in electricity rates.
Mining and manufacturing production rebounded in July compared to the previous month, rising 1.4 percent, helped by the Olympics and a low base effect.
Service output fell in July, down 0.7 percent month-on-month, due to weak wholesale and retail and fewer stock transactions as well as fewer people engaging in outdoor activities due to extremely hot weather.
Retail sales fell 2.6 percent in July, even though sales of semi-durable goods and non-durable goods increased, as durable goods sales dropped due to a sharp decline in automobile sales following the sunset of the individual consumption tax cut on cars.
Facility investment fell sharply in July, down 11.6 percent month-on-month, due to weak transportation equipment. Construction completed rose at a slower pace compared to the previous month, up 1.3 percent, due to weak public sector investment. In July, the coincident composite index rose 0.4 points as the value of construction completed and mining & manufacturing production improved, and the cyclical indicator of the leading composite index rose 0.1 points due to an increase in construction orders received.
Exports increased 2.6 percent year-on-year in August, growing for the first time in 20 months since January of last year, due to more days worked and strong exports of vessels. Stock prices fell and Korea Treasury bond yields increased in August following comments from Federal Reserve Chair Janet Yellen that pointed to the increasing possibility of the Fed raising rates. Also, the Korean won continued to strengthen, but at a slower pace, against the U.S. dollar following the Chairwoman’s comments.
Housing prices increased at a faster rate than the previous month in August (up 0.07 percent) due to demand for apartments scheduled for reconstruction, while Jeonse (lump-sum deposits with no monthly payments) prices increased at the same rate (up 0.08 percent) due to increasing supply.
Economic recovery could be limited if strikes in the automobile industry are prolonged, while external and internal risks to the economy, including the Fed’s rate hike and industrial restructuring, remain.
The government will closely monitor domestic and global economic developments as well as examine the possible impact of internal and external uncertainties on domestic financial markets.
The government will implement expansionary fiscal policies, including the supplementary budget, as well as formulate other policies aimed at increasing consumption and investment.
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Deputy Prime Minister and Minister of Strategy and Finance Yoo Il-ho (Photos: MOSF)
11-Trillion-Won Supplementary Budget Gets Parliamentary Approval
The National Assembly passed a supplementary budget proposal worth 11 trillion won in order to support the restructuring of the shipbuilding industry and prepare for shocks to the job market following the restructuring on Sept. 2.
The finalized supplementary budget was 105.4 billion won lower than the proposal as it was deducted 465.4 billion won from the government proposal and 360 billion won was added anew. To finance the supplementary budget, the government will use this year’s extra tax revenues worth 9.8 trillion won and utilize 1.2 trillion won worth of budget surpluses from last year. The supplementary budget includes 1.2 trillion won of budget expenditures, which will be used to redeem government debt.
The redemption will reduce the government debt by 0.8 percentage points from 40.1 percent to GDP to 39.3 percent.
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