SEOUL, Nov 1: South Korea should not withdraw policy support too soon given uncertain momentum for domestic demand and should offer further growth-accomodative measures if its outlook deteriorates, the International Monetary Fund said on Friday.
The IMF, in a statement, said the country is on track to record economic growth of 2.8 percent this year and 3.7 percent next year.
However, it said South Korea needs to implement further reforms to bolster private domestic demand given the debt constraints which are facing parts of the household and corporate sectors.
The IMF also warned that weaker-than-expected growth in key export markets or more severe market stress will significantly hurt its outlook. But the fund said the country is unlikely to be much affected by further mild turmoil from U.S. Monetary policy normalisation.
‘Beyond 2014, the central government balance could be safely reduced for a while, even after accounting for projected large ageing costs,’ the fund said, adding that such a move would free up resources to help rebalance the economy towards domestic demand.
The fund also said further exchange rate appreciation for the won would further support the economic rebalancing. (agencies)
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