Government assures economy will grow 3%

A finance official Thursday expressed confidence that Korea’s economy would achieve over 3 percent growth this year, citing strong fundamentals and dismissing concerns that the country could face another financial crisis like in 1997.

Ko Hyoung-kwon, the first vice minister of finance, said robust exports and record-breaking Kospi performances paint a positive outlook for the country’s economy, despite geopolitical tensions sparked by North Korea’s recent nuclear and missile tests.

“There have been many media reports highlighting concerns over the North Korea risk,” the vice minister told reporters at the Sejong Government Complex, “but we are not in a situation in which we should be overly concerned.”

On Thursday, the Korean stock market’s main index, the Kospi, closed at an all-time high of 2,474.76 points, despite geopolitical uncertainty on the Korean Peninsula.

Ko suggested the Seoul bourse had become “mature” enough to withstand external factors.

“In the past, financial markets fluctuated easily every time an external risk surfaced,” he said. “But I don’t see such volatility in the market anymore to a point that I find it surprising.”

The vice minister noted that foreign investors were some of the biggest drivers of the stock board’s performance.

In the days after the market reopened from the 10-day Chuseok holiday, foreign investors bought 1.6 trillion won ($1.4 billion) worth of shares.

Ko also cited an International Monetary Fund report released Tuesday that forecasted Korea would post 3 percent GDP growth this year.

The estimate was 0.3 percentage points higher than the last projection made in April.

Addressing concerns that record-high household debt levels could send the Korean economy spiraling toward a debt crisis similar to 1997, Ko noted that back then, the country’s current account balance was a deficit of $10.3 billion. “Last year, it was a $98.7 billion surplus,” he said.

Fitch Ratings on Tuesday maintained its sovereign credit rating for Korea at AA-, citing “robust external finances and a strong macroeconomic performance.”

The agency said it was important to differentiate between the recent escalation of rhetorical threats and the actual “likelihood of war.”

However, Fitch added that the “longstanding standoff” on the peninsula would continue to “weigh on the rating.”

BY KANG JIN-KYU [kang.jinkyu@joongang.co.kr]