By Lee Hyo-sik
Staff Reporter
The nation's top economic policymaker said Monday that the sinking of a navy ship last week will have only a limited impact on the Korean economy, stressing industrial output, employment and other improving macroeconomic conditions are increasingly pointing to a sustained recovery.
Market reactions were mixed, with Seoul stocks closing lower from the previous session as domestic investors turned jittery over the nation's renewed geopolitical risks, dumping won-denominated assets. But foreigners bought local shares, preventing the benchmark index from plunging. With foreigners buying 240 billion won worth of stocks, the Korean won strengthened against the dollar.
Strategy and Finance Minister Yoon Jeung-hyun said the incident's impact on Asia's fourth-largest economy will be determined by the nature of its cause. "The local currency depreciated against the dollar in the international financial market after the accident. But the won has since recovered the lost ground. Judging by what happened in the past, it will unlikely have a significant impact on the domestic financial market."
But Yoon stressed that the government will strengthen its monitoring of both local and international market conditions, and take all measures to contain possible negative fallout from the incident.
On Mar. 26, the 1,200 ton frigate "Cheonan," carrying 104 crew members, sank near the western sea border with North Korea after reporting an unknown explosion that tore the ship in two. Of the 104, only 58 have been rescued, with the remaining 46 still unaccounted for. The exact cause of the explosion is yet to be explained.
On the first trading day since the accident, the benchmark KOSPI fell 5.73 points, or 0.34 percent, to 1,691.99, with the tech-heavy Kosdaq also losing 6.6 points, or 1.26 percent, to close at 518.06.
But the won rose against the greenback as foreigners sold dollars on the domestic foreign exchange market to buy local shares.
The local currency closed at 1,135.5 won, up 3.2 won from last Friday.
Minister Yoon said given improving consumer sentiment and growing corporate investment, the ongoing economic rebound will continue to gain upward momentum down the road. "Improving economic conditions in China and the United States, Korea's two largest export destinations, will boost our outbound shipments."
The minister also said the job market still remains sluggish but it has begun showing signs of improvement in recent months, saying the number of employed will continue to head upward. "Inflation will likely remain tamed at below 3 percent this year. If the domestic demand and exports increase at the current pace, it will not be difficult for the Korean economy to expand 5 percent this year."