Twin balances to power economy

Bank of Korea (BOK) Governor Kim Choong-soo, second from right, talks with the heads of domestic banks at a monthly meeting at the central bank’s headquarters in Seoul, Friday. From left are Richard Hill, CEO of Standard Chartered Korea; Ha Yung-ku, CEO of Citibank Korea; Yun Yong-ro, CEO of the Industrial Bank of Korea; Governor Kim; and Min Euoo-sung, CEO of Korea Development Bank. / Courtesy of BOK

By Kim Jae-kyoung

South Korea will enjoy a balanced growth next year, powered by twin engines — exports and domestic demand, according to the nation’s top central banker, Friday.

At a monthly meeting with heads of domestic banks, Bank of Korea (BOK) Governor Kim Choong-soo said that both exports and local consumption may equally contribute to economic growth during the upcoming 12 months.

“From a macro perspective, exports will grow in line with domestic demand in 2011,” Kim said, citing the bank’s 2011 growth forecast of 4.5 percent. Kim’s remarks have garnered market attention as many economists believe that the nation’s exports will lose steam next year due to falling external demand caused by a slowing recovery of the global economy.

In 2010, Asia’s fourth largest economy has been boosted by government-led stimulus and exports. Exports marked an average increase of 31.3 percent year-on-year in the first three quarters, and surged to a record high in October.

Last week, the central bank forecast that Korea will see its economic growth slow to 4.5 percent in 2011, due to the waning effect of an economic stimulus package and lingering uncertainties dimming the global economy.

Unlike Governor Kim, many economists predict that the Korean economy will undergo an uneven recovery due to lagging exports growth.

“The slowing of U.S. and the European economic activity in both the second and third quarter was quite naturally reflected in Korean economic growth in the fall,” Natixis economist Luca Silipo told The Korea Times.

“I would say that the Korean economic development will continue to reflect the underlying situation of weak economic activity in important export markets and a slowdown, although mild, in other Asian economies,” he added.

Regarding new financial regulations initiated by the G20 countries, the top banker said, “No matter how they will change, it will have little effect on the domestic economy.”

kjk@koreatimes.co.k