Seoul not ready for exit strategy

By Kang Seung-woo

Staff reporter

Despite growing calls for a key rate hike, South Korea is not likely to implement an exit strategy in the coming months as top economic policymakers have joined forces to brace for fallout from the debt crisis in Europe.

Strategy and Finance Minister Yoon Jeung-hyun said Wednesday that the nation would maintain its current economic policy and Financial Services Commission (FSC) Chairman Chin Dong-soo is in a position to look to reinforce the nation's financial system.

``The international financial market is still vulnerable mainly due to the European crisis,'' Yoon said in a meeting of key policymakers.

``As raw material prices still have the possibility of soaring, we will stay on the current course and concentrate on job creation and domestic investment.''

His remark made it clear that it is not the right time to touch the key interest rate, which has been kept on hold at a record low of 2 percent for 15 straight months, amid clamors for a rate increase.

Recently, local economic research institutes have insisted that the government raise the rate.

However, the minister admitted that the local economic recovery is getting back on track, despite internal and external uncertainties.

``The local economy has shown a quicker-than-expected rebound with export and domestic demand on the upswing and as a result, more than 400,000 people were employed,'' he said.

According to the government, about 401,000 jobs were created in April alone, which was the largest monthly increase since August 2005.

Meanwhile, Chin said that the nation would allow for maneuvers to keep a volatile capital flow from having influences on the economy.

``We are taking a fresh look at whether additional steps are needed to further strengthen our foreign currency liquidity condition,'' the head of the nation's financial regulator said at the Korean Economic Forum in Seoul on the same day.

``One important goal in this endeavor is not to leave the market swayed by external shocks whenever they happen. At the same time, we will continue to fine-tune regulations in the context of both international consensus and our unique market considerations.''

Emerging countries, including Korea, have been victims of a sudden capital outflow amid financial crises.

And Chin said that as the host nation, Korea will play a key role in addressing the problem at the G-20 Summit in Seoul.

``We will be endeavoring to highlight systemic risks in emerging countries and produce firm and reassuring outcomes from world leaders,'' the 61-year-old said.

``Korea will be pushing for a consensus from the G-20 and the FSB on creating new mechanisms that can effectively address this critical issue.''