Economy would have shrunk 1.3 pct in 2009 without stimulus: report

SEOUL, Dec. 23 (Yonhap) -- South Korea's economy might have contracted 1.3
percent this year had the government not implemented massive fiscal spending to
fight off the global financial crisis, a private researcher said Wednesday.

Since the onset of the global crisis more than a year ago, the government has
pumped into its fiscal budgets stimulus packages worth some 3.6 percent of the
nation's 2007 gross domestic product, Samsung Economic Research Institute said in
a report.
Helped by the aggressive measures and the Bank of Korea's moves to cut interest
rates to a record low, the Korean economy is expected to grow 0.2 percent this
year.
From October of last year, the central bank cut its base rate six times to a
record 2 percent to help Asia's fourth-largest economy battle the impact of the
global downturn.
But the research institute warned the nation's financial markets are still
vulnerable to instability in the global financial system because the nation's
highly leveraged banks are exposed to global credit markets.
"The authorities should tighten regulations and supervision of short-term
overseas funds and strengthen an international coordination system to cope with a
situation where such funds flow out of the country," said Shin Chang-mok, a
senior researcher at the institute, in the report.
(END)