S. Korean think tanks concerned about excess liquidity

SEOUL, May 8 (Yonhap) -- South Korean think tanks expressed concerns on Friday
that excess liquidity may negatively affect the local economy once it makes a
full recovery.

Inflationary pressures down the road, caused by an increase in liquidity in the
market, could hammer the economy, experts from public and private economic
research institutes said in a seminar here.
The gathering, hosted by Knowledge Economy Minister Lee Youn-ho, brought together
experts from groups such as the LG Economic Research Institute, Samsung Economic
Research Institute, Hyundai Research Institute and Korea Development Institute.
A lack of investment opportunities have caused private-sector firms to hold onto
their money over the past few years, and a 28.4 trillion won (US$22.5 billion)
extra budget passed by parliament on April 29 could inject more funds into the
market.
The government has said the supplementary budget will be used to create 550,000
new jobs and revive the sagging economy, which many anticipate will post negative
growth this year.
Oh Sang-bong, head of the state-run Korea Institute for Industrial Economics and
Trade, said that if the economy starts to make a comeback in the second half,
such steps could ultimately lead to higher consumer prices.
He added that a turnaround in the global economy may lead to a rise in prices for
crude oil and raw materials, and that some countries may resort to trade barriers
to protect domestic industries and interest groups.
"There is a particular need to carefully implement economic policies," the think
tank president said.
Others at the seminar said that despite some positive signs, it is too early to
say when the country's economy will hit bottom.
Industrial production, exports and consumer sales growth remained in negative
territory compared to last year, but the pace of the fall has decreased in the
past few months.
Another participant at the seminar, meanwhile, speculated that any recovery will
take on a gradual "U-shaped" pattern. While acknowledging the risk of excess
liquidity, he said the present situation warrants aggressive policies designed to
fuel spending, investment and production.
"Unemployment remains high, along with uncertainties in the financial sector that
are weighing down growth," an analyst said. He noted that the country recently
logged a sizable trade surplus, which may strengthen the Korean won against the
U.S. dollar, hurting local manufacturers' price competitiveness in the global
market.
Economic experts also stressed the importance of fueling growth in the
post-crisis era, and making efforts to transform South Korea into a value-added,
knowledge-based nation that has a strong presence in eco-friendly industries.
yonngong@yna.co.kr
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