Korea Agrees to Continue Expansionary Policies
By Yoon Ja-young
Staff Reporter
The government agreed with the International Monetary Fund's (IMF) advice that it should continue an expansionary policy until next year. This means an ``exit strategy'' to withdraw supportive measures taken in the period following the global economic crisis isn't likely to be implemented for the time being, despite a rattling housing market.
According to sources at the Ministry of Strategy and Finance, Lee Hi-su, executive director for Korea at the IMF, said in a statement regarding the IMF report that the Korean government is well aware that the economy is not back on track to fully recover on its own.
He said the government agreed with the IMF that it would be too early to withdraw the fiscal expansionary plan in 2010.
An IMF delegation visited the country for an annual consultation for 13 days from June 25, and advised that Korea should continue its fiscal expansionary policy until next year to ensure a full economic recovery.
Hence, the exit strategy is not likely to be adopted for the time being.
There has been talk over when the government should start absorbing the huge liquidity on the market following the huge economic stimulus package and a series of interest rate cuts to boost the economy amid the global recession.
Also, the real estate market has shown signs of a bubble, adding to the concern.
Since the government is unlikely to adopt an exit strategy as of yet, it is expected to take other micro measures to stabilize real estate market.
Lee also said that the government would continue keep the foreign exchange reserve, on the determination that the huge foreign exchange pool helped the country survive the crisis.
He added that the government and the IMF agreed that Korea should focus on enhancing labor productivity in the services sector and improving the sluggish small - and medium - sized business sector.
The country's economy expanded by 2.3 percent in the second quarter from the previous quarter, marking a rapid recovery compared with other major economies.