Conditions fast improving for positive annual growth this year: finance minister

SEOUL, Oct. 26 (Yonhap) -- South Korea's finance minister Monday termed the
central bank's latest report on economic gains reached in the third-quarter a
"surprise," and cautiously predicted that the Korean economy will post positive
annual growth this year.
Earlier, the Bank of Korea (BOK) announced that the country's gross domestic
product (GDP), which measures broad economic performance, expanded 2.9 percent
during the third quarter from three months earlier on improving domestic demand
and robust exports, marking the fastest advance in over seven years.
The latest GDP figure marks the third straight quarter of economic growth. It
grew 0.1 percent and 2.6 percent in the first and second quarters respectively,
after having fallen 5.1 percent in the final three months of 2008.
"The third-quarter growth is a surprise given that the economy still faces many
downside risks such as a fiscal restraint, (falling) exchange rates and (higher)
oil prices," Finance Minister Yoon Jeung-hyun told a forum held in central Seoul.
"Things are fast improving enough to predict positive annual growth for this year
just a few months after the International Monetary Fund predicted a contraction
of 4 percent for the South Korean economy," he added.
Buffeted by the global financial crisis and an ensuing economic downturn, the
government has been striving to stimulate consumption, corporate investment and
exports at a time when its economy is feared to post the first minus growth in
more than a decade this year.
The government and the central bank joined other major countries in expanding
fiscal spending, cutting taxes and slashing the key interest rate to a record low
to kick-start the sluggish economy.
Debate has been growing, however, over when is the right timing for the
government to roll back those stimulus measures as some experts are worried that
delayed action could cause a market bubble and cause the economy to face a
downturn again.
Yoon reiterated his earlier stance, saying that it is still "too early" to start
the so-called exit strategy as the private sector is still not able to grow
without state help and asset price hikes are easing.
"(Exit strategies) should be pursued when the economic recovery is on a solid
path by taking into account their possible impact on other countries. Their
timing, scale and sequence, however, can vary depending on each country and its
policy types," the minister said.
His comments come as some are betting that the BOK may soon begin to raise its
key interest rate as the economy is fast rebounding.
On Oct. 9, the central bank froze its key interest rate at a record low 2 percent
for an eighth straight month, saying that it will maintain its soft monetary
stance for the time being while it assesses economic conditions.
According to the latest prediction by the government, South Korea's economy is
expected to shrink 1.5 percent this year, the first minus growth since the
1997-98 financial crisis.
kokobj@yna.co.kr
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