Financial Crisis Of Argentina, Will Korean Economy Maintain?

As the financial crisis in Argentina seems to spread throughout the whole Central and Latin America, a concern is raised whether struggling Korea and emerging market countries in Asia will likely be influenced by the crisis.

The Asian Wall Street Journal (AWSJ) warned yesterday, ``The causes of the situation are the excessive government debt, budget deficit, and evasion of capital. And a similar situation is likely to take place in Thailand, Malaysia, and Indonesia.``

The government announced that closely monitoring the situation, they will strengthen the structure of the economy by completing the reconstruction, rather than by boosting it with the red-ink finance. (related article on A5)

The Chairman of the Bank of Korea Jeon Churl-Whan pointed out yesterday, ``The financial crisis in Argentina and Turkey can affect other newly-rising countries. If the risk evaluation against the emerging market countries becomes strict, it may be a circuitous burden for Korea as well.`` ``Since the fragility of our financial structure has not been settled yet, and if the profitability of enterprises worsens due to a setback in the reconstruction procedure, our economy may possibly shake again``, he warned.

Deputy Prime Minister and Minister of Finance and Economy Jin Nyum said, ``The financial crisis in Argentina dose not seem to be contagious toward the world financial market yet. Since we have secured enough amount of foreign currency and the state of the current balance and the foreign loan are better than that of 1997, we don’t have to be excessively pessimistic.``

``It is not desirable to boost the economy with the red-ink budget because it may damage the foundation of our economy``, Deputy Prime Minister Jin added.

Experts pointed out that to be freed from the anxiety on a recurrence of a crisis that appears whenever a crisis takes place in the Central-Latin America or Southeast Asia, it is important for the government to create a systematic long-term strategy maintaining the vitality of the economy by resolutely easing the regulations. The AWSJ also said, ``The responsibility of governments is crucial for newly-rising countries.``

Kim Suk-Joong, a director of the Federation of Korean Industries, said, ``In fact, there have been many temporary economy policies presented by the government to solve pending problems. Therefore, it is urgent to have a master-plan on the direction of our economy.``

Park Won-Jae parkwj@donga.com