BOK’s Lee sanguine on U.S., Europe

Economy

Published: 16 May. 2014, 19:39

BOK’s Lee sanguine on U.S., Europe

Bank of Korea governor Lee Ju-yeol, fifth from right, poses with heads of banks at the central bank yesterday. From left, Lee Soon-woo, chairman of Woori Financial Group; Kim Han-jo, Korea Exchange Bank president; Kim Jong-jun, Hana Bank president; Ha Young-ku, Citigroup Korea CEO; Kwon Seon-joo, Industrial Bank of Korea president; Kim Ju-ha, NH Bank president; Lee Kun-ho, KB Kookmin Bank president; Ajay Kanwal, Standard Chartered Korea president. [NEWSIS]

Bank of Korea governor Lee Ju-yeol said the general consensus of central bank governors and economists around the world is that despite a wobbly first quarter, advanced economies, including the U.S., Europe and Japan, are on a steady course of recovery.

Lee’s comment was made during a monthly meeting with the nation’s top bankers at the central bank in downtown Seoul yesterday.

“The U.S. economy in the first quarter fell back slightly because of unusual weather, but the perception that it will recover in the second quarter was maintained,” Lee said.

Earlier this week, the governor was in Switzerland to attend a Bank for International Settlements (BIS) meeting.

Lee said Japan’s first-quarter growth was somewhat satisfactory thanks to the domestic market, although exports were weak.

“Consumption is strong thanks to the sharpest pay raise since 2000, and it is likely that inflation would reach [the Bank of Japan’s] target of 2 percent,” Lee said.

China’s first-quarter growth of 7.4 percent nearly reached the government’s target of 7.5 percent.

The governor said the overall outlook remained the same as a month ago during the G-20 meeting.

There are growing concerns that Korea’s economic growth may not reach the central bank’s target of 4 percent as advanced economies falter.

Alarm bells rang when U.S. economic growth in the first three months of the year nudged up only 0.1 percent over the same period as the previous year. This was a sharp drop from the fourth quarter of 2014 when it expanded 2.6 percent. The main reason for this is considered to be the exceptionally cold weather that dampened consumption, business investments and even exports.

Although emerging markets, including China, have helped Korea maintain growth since the global financial crisis of late 2008, it has been the advanced economies, particularly the United States, that have helped Korea’s ongoing export growth since the second half of last year. Slower growth in the United States would dent Korea’s exports, which have recently been threatened by the appreciation of the won against the U.S. dollar.

Even the Korean domestic market, which was in recovery mode thanks to growing consumption, has hit a wall after the sinking of the Sewol brought spending to a halt.

On that issue, Lee said it was essential to execute a policy that would strengthen the domestic market. Since he was appointed governor of the central bank, Lee has stressed the need to reduce Korea’s heavy reliance on exports and concentrate on the domestic market.

There is growing speculation that the governor will soon tighten monetary policy.

By lee ho-jeong [ojlee82@joongang.co.kr]