IMF Report, “South Korea is in its Early Stage of Economic Recovery”

The International Monetary Fund (IMF) said on Tuesday, “South Korea is in its early stage of economic recovery along with the global economic recovery."

The IMF prospected in the “2003 Annual Consultation meeting with Korea’s Government” revealed that an economic recovery is on its way in Korea, with growth likely to accelerate to 4.75 percent in 2004 and 5.5 percent in 2005

The IMF mission for the annual consultation meeting (two weeks of policy consultations) with the Korean government officials, headed by Joshua Felman, assistant director of IMF’s Asia Pacific department, discussed Korea’s current economic situations with central bankers and economists, which ultimately lead to their announcement in the report.

The IMF expressed its sympathy about the Korean government’s inflation policy, which was to restore the system to its previous conditions, and stressed that financial and monetary policies should be projected to an economic recovery for the time being.

The IMF expressed its opinions that it is desirable to recover a balanced finance in the long term, but it would be unwise to tighten the budget in 2004, as this could undermine the recovery, which is still in its early and fragile stage.

It has also been advised that the country maintain the current interest rate level for the time being, as long as there are no big changes in economic conditions, with inflation projected to decline to 2.5 percent next year, below Bank of Korea’s target of 2.5 percent ~ 3.5 percent.

“It will be desirable to sell Korea Investment & Securities Co. and Daehan Investment & Securities as soon as possible after selling Hyundai Investment & Securities within this year,” the IMF added.

Besides that, the IMF strongly supports the country’s efforts to reduce the gap between ownership and control, as well as the plan to encourage companies to adopt the holding company structure improvement of labor market system for the flexibility of labor market.

Kwang-Hyun Kim kkh@donga.com