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IMF Says South Korea's Economy will Grow by 3 Percent Next Year

by YuGee / Aug 15, 2016 06:41 AM EDT
One of Asia's most affluent countries, South Korea, is the region's third largest economy with he longest working hours in the world. (Photo by Ed Jones / Getty Images)

On August 13, the International Monetary Fund said that the economy of South Korea is anticipated to expand by 3 percent next year.

In a report on the conclusion of its annual consultation with South Korea, the agency stated, "Growth is projected to tick up to 2.7 percent this year and 3.0 percent in 2017, with inflation remaining subdued. The anticipated pickup in activity is based on growing private consumption, a stronger housing market, and the impact of fiscal and monetary easing."

In a report on its website, the Korea Herald stated that the IMF said South Korea's economy is dealing with various structural headwinds that include an aging society, pockets of corporate vulnerabilities, severe export dependence, labor-market distortions, and delayed productivity. However, the report also stated that the country has "considerable fiscal space to manage these challenges."

The agency further said that export potential and prospects will still remain difficult and credit is anticipated to grow continuously, believed to be partly indicating the effect and impact of interest rate cuts, although it will be at a slower pace due to the constraining of prudential measures and the expected moderation in construction investment after 2017.

IMF presides bilateral discussions with member countries every year to recap their overall economic progress and fiscal policies. A delegation of the IMF visited South Korea earlier this year in order to conduct meetings with government officials from the finance ministry, the Financial Services Commission, and the Bank of Korea.

The Executive Directors of IMF praised the country's remarkable economic achievements over the past six years and supported the officials' strong emphasis on structural reforms in order to overcome the challenges and increase growth potential.

The Directors also supported the officials' efforts on corporate restructuring and encouraged appropriate implementation of such efforts for troubled firms while assuring a decent social safety net for affected workers. The Directors approved the plan to recapitalize the policy banks. However, they also emphasized the importance of enough budgetary resources and the urgency to unwind the bridge financing from the Bank of Korea. 

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