World Bank dismisses BOK's optimism

Bank of Korea Governor Lee Ju-yeol, left, and World Bank chief economist Carmen Reinhart / Korea Times file

By Park Jae-hyuk

The World Bank seemingly agrees with recent warnings the International Monetary Fund (IMF) sent to the Bank of Korea (BOK) over the central bank's "quite optimistic" position on the country's growth outlook.

Carmen Reinhart, the chief economist at the international financial institution, said in a pre-recorded speech for the Institute for Global Economics (IGE) conference held Friday that it could take up to six years for the world economy to regain per capita income it had before the COVID-19 pandemic.

"One distinction that I'd like to make is ― let's not confuse rebound with recovery," she said. "For the U.S. in 2008 and 2009, it took five years to get back the pre-crisis per capital income, and for Europe, it took much longer."

The economist claimed it was difficult to expect a swift (or V-shaped) recovery from the current crisis, taking a cautious assessment toward global economic forecasts.

The remarks were seen as a contrast to those of BOK Governor Lee Ju-yeol, who considered the IMF's latest adjustment of the country's growth outlook as "immoderate."

The IMF revised Korea's economic outlook to a 2.1 percent contraction Wednesday up from its 1.2 percent forecast in April. However, Lee maintained the bank's earlier forecast of a 0.2 percent contraction was appropriate, saying the IMF seemed to have been a bit "immoderate," when it adjusted Korea's economic outlook to reflect the impact of the worse-than-expected global economic outlook.

Carlyle Group co-founder David Rubenstein

During the conference, Carlyle Group co-founder David Rubenstein also gave a warning to investors who were hoping to interpret the recent stock market rally as the signal of an economic recovery.

The billionaire businessman attributed the rally to the extreme popularity of tech giant stocks, such as Microsoft, Amazon, Facebook and Google, which does not reflect the ongoing recession in the restaurant, travel and entertainment industries.

He forecast the economy will "never return" to its previous state ― even if it rebounds ― because businesses have already begun recognizing that they do not need the same number of employees as before, after they began conducting work-from-home experiments.

Financial Services Commission Chairman Eun Sung-soo delivers a speech at the Institute for Global Economics international conference at Lotte Hotel in Seoul, Friday. / Yonhap

Financial Services Commission Chairman Eun Sung-soo called for international cooperation to minimize the fallout from the COVID-19 pandemic.

"In 2008, the financial crisis was constrained effectively through brisk international cooperation," he said at the conference. "At this moment of another global financial crisis caused by COVID-19, it's too bad there's hardly any effort for international cooperation."

The financial regulator also hinted that the government may further extend the maturity of debts provided to companies affected by the coronavirus, if it fails to contain the virus by September.

Jointly hosted by the IGE and Hana Bank, the annual event offered a venue for economic experts, entrepreneurs and government officials from around the world to discuss the economic paradigm shifts in a post-COVID-19 world and the future of online and offline finance.

Those who participated online included Nobel laureates Robert Merton, Joseph Stiglitz and Edmund Phelps; and global financial leaders, such as Institute of International Finance CEO Tim Adams and MSCI Chairman Henry Fernandez.

Site Map E-paper Subscribe Register LogIn
Site Map E-paper Subscribe Register LogIn