Outside uncertainty makes sustainable recovery tough to predict

SEOUL, May 19 (Yonhap) -- South Korea's stimulus measures have helped ease a
sharp economic downturn but it is still premature to say that the recovery will
be sustainable as outside conditions remain cloudy, the finance ministry said
Tuesday.

South Korea will have to continue its current policy efforts as a slump in
exports, employment and domestic demand continues to weigh on the economy, the
Ministry of Strategy and Finance said in a statement.
"On the back of stabilizing financial markets and the government's expansionary
macroeconomic measures, it seems that a sharp economic downturn is abating.
Still, the pace of recovery is slow and uncertain outside conditions make it
tough to predict that recovery will continue," the ministry said.
"Despite improvements in some economic indicators and eased instability in
financial markets, employment, domestic demand and exports continue to decline.
The government needs to stick to its policy efforts to make economic recovery
really materialize," it added.
The broad assessment of current economic conditions came as Finance Minister Yoon
Jeung-hyun marked his 100th day in office after inauguration as the nation's top
financial and economic policymaker in February.
Yoon took over for his embattled predecessor Kang Man-soo just as most indicators
were pointing to a protracted economic slump and financial markets were
undergoing sharp turbulence, spawning concerns the nation could suffer a repeat
of the crisis that hit Asia a decade ago.
Immediately after inauguration, Yoon sharply lowered the government's growth
target to minus 2 percent from a seemingly unachievable plus 3 percent, while
unveiling diverse pump-priming measures including tax cuts and additional fiscal
spending.
Adding to government efforts, parliament endorsed a record 28.4 trillion won
extra budget last month mostly aimed at generating jobs and bolstering anemic
domestic demand.
The mood seems to have changed recently as some indicators are improving.
Industrial output is rebounding and the decline in exports is easing, though the
labor market remains tight, according to recent government data.
Stock and currency markets are also rising after suffering sharp fluctuations
last year thanks to an improved current account and the success of the government
in easing concerns over a short-term liquidity crunch by issuing $3 billion worth
of dollar-denominated state bonds last month.
The central bank also joined the efforts by lowering its key interest rates to a
record low.
The nation's economy managed to avert a technical recession with its gross
domestic product rising 0.1 percent in the first quarter from three months
earlier, emerging from a sharp 5.1 percent plunge in the last quarter of 2008,
the ministry said.
The ministry estimated that the government's active liquidity injection and
expanded fiscal spending contributed to stabilizing sentiment here, but downside
risks still remain in the picture.
"We still need to accelerate efforts to improve the fundamentals of our economy
by pushing for corporate restructuring, easing regulations in value-added
industries such as education and medical sectors and making labor market
conditions more flexible," the ministry said.
"With uncertainty still hanging over at home and abroad, we need to send a
consistent message to markets through close consultation and adjustment among
related ministries and agencies, while seeking a public consensus before
implementing economic polices," it added.
kokobj@yna.co.kr
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