Korean economy resilient despite tensions: IMF chief

By Park Hyong-ki

IMF Managing Director Christine Lagarde / Yonhap

South Korea’s economy will demonstrate “high resilience” this year despite geopolitical risks and other challenges, according to Christine Lagarde, managing director of the International Monetary Fund (IMF).

She said the IMF’s growth forecast for South Korea also remains unchanged ― 3 percent this and next year.

“We are optimistic. I have a good impression of the Korean economy, and the performance is of good quality,” she told the press in Seoul, after meeting with President Moon Jae-in and Finance Minister Kim Dong-yeon. “All of that despite difficult circumstances we all know.”

However, she said the IMF sees downsides to an economy that faces geopolitical tension, as well as upsides to one seeking “resolution and reestablishing certainty.”

Korea’s economy is highly diverse with multiple trading partners.

“In any circumstances, conflicts and war hurt development and people,” she said. “In that sense, I believe the strength of the Korean people, the economy will stand and be hopeful that the tension will resolve in a positive way.”

She said she suggested that President Moon devise a legal framework that can encourage more female employment in the labor market and boost social safety net for the elderly.

Even though the economy is resilient on continuous current account surpluses, Korea faces challenges, in addition to North Korea’s threats.

Korea’s two main challenges are its working population will start to decline by 100,000 this year amid an aging society, and this leads to its second challenge, which is declining productivity.

“New economic policies must be considered to address key challenges ahead,” she said. “The fiscal space I referred to (in a meeting with Korean authorities) could be in good use if targeted toward challenges in the medium term.”

The IMF managing director also recommended the President and finance minister to establish a “fair competition environment” that would support innovation in the private sector.

“This would be good for productivity,” she said. “We believe that combining the integration of women, innovation and fair competition, good developments can occur in the Korean economy.”

She also sided with global free trade, stressing that trade has been a “significant contributor to many objectives,” including eliminating poverty, improving the standard of living and boosting productivity.

“Trade is an important engine for sustainable, inclusive and balanced growth,” she said.