S. Korea must wait until early next year for 'exit strategy': official

SEOUL, Sept. 20 (Yonhap) -- South Korea must keep its expansionary economic
policy "for the time being," a presidential advisor said, supporting the
government's cautious stance over when to roll back stimulus measures introduced
to ease a steep downturn.
Kang Man-soo, a former finance minister and recently-appointed special
presidential advisor for economic affairs, said the government should wait at
least until early next year before seeking such an "exit strategy" as those in
the lower-income bracket would suffer most from a hasty policy shift.
"It will be salaried and low-income people with heavy debts -- not businesses --
who will suffer most from the government's premature move (to adopt an exit
strategy)," Kang told Yonhap News Agency in a recent interview. "Timing should be
selected in a cautious and conservative way. The expansionary economic policy
stance should be kept in place for the time being."
Kang added he was unsure about when the right time would be for an exit strategy,
but he said the government should wait "at least until early next year" before
withdrawing stimulus measures.
His comments come amid growing signs that the nation's economy is rebounding from
its worst downturn in more than a decade, driven by swift government and central
bank measures to kick-start the economy.
South Korea's government has unveiled diverse economy-boosting measures,
including expanded fiscal spending and tax cuts aimed at bolstering consumption
and corporate investment. The central bank also joined the move by slashing its
key interest rate to a record low of 2 percent.
Thanks in part to such active expansionary measures, South Korea's economy has
achieved a rapid recovery, with key economic indicators signaling a rebound from
the worst economic downturn since the 1997-98 financial meltdown.
The improved mood has sparked debate among policymakers and experts about the
need to withdraw the measures as excessive liquidity could cause such side
effects as inflation and bubbles in the housing market.
The Bank of Korea, which prioritizes taming inflation, recently hinted that it
would conduct a rate hike if housing prices continue their upward trend,
indicating the nation's central bank could take a more pro-active stance on
monetary policy direction.
The cautious stance on an exit strategy by Kang, who led the nation's finance
ministry until February of this year, is in line with the positions of other
high-ranking policymakers.
Finance Minister Yoon Jeung-hyun recently confirmed that it is "premature" to
seek an exit strategy and that the government will wait until the economy shows
signs of a more substantial recovery.
"Make no mistake, the Korean government is committed to maintaining active fiscal
and financial policies until the economy is firmly established on a path to
recovery," Yoon said in a recent meeting with foreign reporters.
"It is appropriate that the exit strategy should be initiated in tandem with
international coordination, especially with the G20 countries. I believe
implementing an exit strategy alone and too early will weigh down the economy,"
he added.
In a TV program aired earlier in the day, Chin Dong-soo, chairman of the
Financial Services Commission, also echoed that view, saying an exit strategy
should be pursued in cooperation with the international community.
kokobj@yna.co.kr
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