First Vice Minister of the Ministry of Economy and Finance (MOEF) Bang Ki-sun hosted an investor roundtable (IR) in New York on February 13 to look into foreign investors’ perspectives and maintain their confidence on the Korean economy by making them well informed on Korea’s current economic situations. VM Bang gave a presentation at this event under the theme of ‘Korea’s Steadfast Economy.’ The following is a summary of his presentation.
Four questions about the Korean economy
VM Bang gave answers to the four questions that have been recently raised for the Korean economy amid heightened external uncertainties.
- Current / Trade account: In 2022, Korea’s current account remained in surplus at around US $30 billion, despite posting a trade deficit due to surging energy prices. Exports are projected to gradually increase given the semiconductor industry’s expected recovery from the second half of 2023 and China’s reopening.
- Foreign exchange (FX) market and external soundness: The Korean won serves as a bellwether for the global FX market as indicated by its rapid appreciation at the beginning of this year after considerable depreciation last year driven by a strong US dollar. Korea’s external soundness remains in good shape in consideration of its sufficient FX reserves, upward trends in net foreign assets, stable Credit Default Swap (CDS) premium levels and high credit ratings.
- Short-term capital market: The short-term capital market hit hard by last year’s Legoland shock has been stabilized mainly as a result of policy efforts, and the government will also strive to thoroughly manage project financing (PF) risks by ensuring a soft landing in the real estate market.
- Debt levels: Taking into consideration its relatively low short-term external debt to total external debt ratio and high foreign currency Liquidity Coverage Ratio (LCR), Korea’s debt servicing capacity is quite manageable and the possibility of government and household debts posing a risk to the economy is limited considering well-managed fiscal soundness and low delinquency ratios.
Korea’s 2023 economic policy directions
VM Bang introduced Korea’s 2023 economic policy directions that are aimed at overcoming economic challenges and boosting growth potential.
- Overcome economic challenges: The government has made various policy efforts to reinvigorate the economy. These include early fiscal execution (65 percent in the first half of 2023), all-round support to boost exports tax benefits for investments in national strategic technology, and regulatory innovation.
- Boost growth potential: In an effort to improve economic fundamentals, the government has focused its policy capacity on the New Growth Strategy 4.0, structural reforms in the labor, education and pension sectors, and capital market accessibility enhancement in line with global standards.
- Prepare for the future: The government is committed to achieving economic sustainability by responding to climate change, managing supply chain risks and addressing demographic transition.