Fiscal stimulus, eased monetary policy help S. Korea's economy: OECD official

SEOUL, Jan. 18 (Yonhap) -- Expanded fiscal spending and an eased monetary policy
resulted in generating jobs, fostering corporate investment and boosting domestic
demand in South Korea, helping the country out of a steep downturn caused by the
global recession, a ranking official at a global organization said Monday.

Exports also contributed to the faster-than-expected recovery, making the country
one of just three whose output rebounded to pre-crisis levels, said Randall
Jones, head of the Korea and Japan desk at the Economics Department of the
Organization for Economic Cooperation and Development.
His comments were made during a presentation to a meeting in Seoul held to mark
the first year of the government's efforts to weather the global financial and
economic crisis. The meeting was arranged by the state-run Korea Development
Institute.
"Domestic demand has recovered, thanks in part to large-scale fiscal stimulus
amounting to 6 percent of gross domestic product, the largest in the OECD area,"
Jones told the meeting. "Fiscal stimulus is estimated to have boosted employment
by 200,000 in 2009, limiting the rise in unemployment and helping to sustain
private consumption."
"The easing of monetary policy also pushed the real short-term interest rate into
negative territory in early 2009, encouraging investment and easing the debt
burden," he noted.
He added that "strong" export growth helped bolster investment and employment, in
part driven by the nation's local currency's sharp depreciation against the U.S.
dollar last year.
"The 2008 global crisis had a severe impact on Korea, given its dependence on
trade. The fall in output, however, was accompanied by a large decline in the won
of more than 30 percent in effective terms, which increased its competitiveness
in world trade, leading to large export market share gains," Jones said.
His estimates on Asia's fourth-largest economy are in line with many local
policymakers and global institutes.
Hit by the global recession last year, South Korea's economy quickly rebounded
from the steep downturn with many indicators returning to pre-crisis levels.
Industrial output is gaining ground, with exports rising and consumption also
showing signs of picking up. The government predicts that the economy will grow 5
percent this year after expanding an estimated 0.2 percent last year.
South Korea's faster-than-expected rebound is frequently attributed to the
government's "swift and active" fiscal spending aimed at bolstering investment
and consumption, while aggressive moves by the nation's central bank to lower its
key interest rate to a record low of 2 percent also contributed to the recovery.
Some experts still raise concerns that the global economy might fall into a
double dip recession after a short-lived rebound, calling for South Korea to
capitalize on the crisis to take a lead in the global post-crisis market.
James Ahn, a partner at consulting firm McKinsey & Company, said in his
presentation during the meeting that in order to convert the crisis into
opportunity, companies in South Korea should "sustain innovation, ensure cash
sufficiency, drive structural changes in business portfolio, nurture talented
workers and push for merger and acquisition and other business development
activities."
kokobj@yna.co.kr
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