Gov’t tells Moody’s that Korea can handle risks

Vice Finance Minister Kim Yong-beom downplayed economic risks during a meeting with global credit ratings agency Moody’s, emphasizing that Korea has enough fiscal room to respond.

According to the Ministry of Finance on Friday, Kim acknowledged the double whammy situation that Korea’s economy faces through external trade risks and structural changes to local industries at the Moody’s meeting in London on Thursday.

The vice finance minister explained that the country has plenty of policy room to avoid such risks as it plans to maintain its national debt-to-GDP ratio at a relatively low 40 percent range in the near future.

The Organisation for Economic Cooperation and Development average sits in at over 100 percent.

According to the Finance Ministry, the credit ratings agency expressed support for Korea’s plans for an expansionary fiscal policy. The government has proposed to increase its budget for next year by 9.3 percent from this year’s budget.

Kim also argued against worries that Korea is experiencing deflation, saying that the negative inflation rate last month was caused by supply factors such as increased agricultural goods and a drop in crude oil prices.

Korea’s consumer price index fell 0.4 percent last month from the previous year, entering negative terrain for the first time since the data started being recorded in its current form in 1965. Core inflation, which removes volatile factors such as agriculture and petroleum prices, also remained low at 0.6 percent last month compared to the near 1 percent level earlier this year.

Despite the government calling for calm against worries to the economy, global credit ratings agencies have been pessimistic about Korea’s economic growth this year.

S&P earlier this week reduced Korea’s GDP growth for this year to 1.8 percent, down from its 2 percent forecast made in July.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]