Finance minister says inflation remains top priority for Korea

Economy

Finance minister says inflation remains top priority for Korea

Published: 14 Apr. 2023, 15:55

Finance Minister Choo Kyung-ho speaks to reporters in Washington on Thursday during his trip to attend the spring meetings of the World Bank and the IMF. [NEWS1]

Inflation remains the top priority for Korea amid economic uncertainties that are expected to persist through the first half of the year, said Finance Minister Choo Kyung-ho Thursday.

“Korea’s economy is expected to gradually recover, but we will thoroughly monitor to stabilize the economy and the market as uncertainties on economic trends are large and anxiety remains in the finance sector,” Choo told reporters at the International Monetary Fund (IMF) building in Washington.

Choo is on a trip to the United States for the Group of 20 Finance Ministers and Central Bank Governors’ meeting.

“Inflation is gradually falling from the 6.3 percent peak, but consumer prices remain very high at 4.2 percent. So solidifying the foundation for price stability is the policy’s priority.”

Korea’s inflation is projected to fall to the 3 percent range by the year end, according to Bank of Korea Gov. Rhee Chang-yong following a Monetary Policy Board meeting Tuesday, where the rate remained unchanged for the second time in a row. The rate remained at 3.5 percent.

Countries generally agreed with the IMF’s views on challenging economic recovery this year, as many are suffering from attempts to simultaneously tame inflation while stabilizing the financial market, according to Choo.

But he added that credibility related to Korea’s financial market remains high on Wall Street and by the credit ratings agencies.

“Banks are most robust and the default rate is rising in some non-financial sectors, but the possibility of it spreading across the market is very limited.”

Concerns about the finance sector grew due to U.S. Silicon Valley Bank and Credit Suisse, which was acquired by rival UBS, Switzerland’s biggest bank, last month.

During the trip, Choo met IMF figures, including Managing Director of the IMF Kristalina Georgieva.

The IMF revised down the outlook for Korea’s economic growth this year to 1.5 percent on Tuesday in the April edition of the World Economic Outlook. The figure was down by 0.2 percentage points from the previous forecast.

The growth outlook was lowered due to the aggravating semiconductor industry and slowing domestic consumption, according to Krishna Srinivasan, director of the Asia and Pacific Department at the IMF at a press conference in Washington Thursday.

He said exports and investments are both affected by the weak chip market. The IMF official also noted slowing consumption and weakening domestic demand from monetary tightening and adjustments in the housing market following the pandemic.

On Friday, Choo met his U.S. counterpart Janet Yellen and sought cooperation on the inflation reduction act (IRA), citing concerns by local businesses about its impact.

Choo also expressed gratitude for the guidelines for the IRA that reflect the opinions of Korean businesses.

The U.S. Treasury Department released a guidance late March to clarify who can benefit from the act’s electric vehicle tax subsidies.

BY JIN MIN-JI [jin.minji@joongang.co.kr]