Gov't watching markets closely as Middle East conflict escalates

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Gov't watching markets closely as Middle East conflict escalates

Published: 02 Oct. 2024, 16:25 Updated: 02 Oct. 2024, 19:26

SHIN HA-NEE
shin.hanee@joongang.co.kr

Israel's Iron Dome anti-missile system intercepts ballistic missiles fired by Iran as seen from Ashkelon, Israel, on Tuesday. [REUTERS/YONHAP]

The Korean government is on high alert as the rapid escalation of the armed conflict in the Middle East region is driving market volatility across the globe, Minister of Economy and Finance Choi Sang-mok said, as greater crude price uncertainties may reverse the recent slowdown in inflation.

During an economic ministerial meeting on Wednesday, the minister promised to monitor the market closely and announced policy plans to stimulate stagnant domestic demand.

"As Iran launched a missile attack against Israel overnight, the heightened tension in the Middle East region has driven volatility in the global stock market and fuel prices,” noted Choi in his remarks during the meeting held at the government complex in central Seoul.

Minister of Economy and Finance Choi Sang-mok speaks during an economic ministerial meeting held at the government complex in central Seoul on Wednesday. [MINISTRY OF ECONOMY AND FINANCE]

"The government will remain highly vigilant and closely monitor [the ongoing armed conflict's] impacts on the financial market and real economy and will promptly respond in cooperation with relevant agencies if necessary,” said the minister.

Separately from the ministerial meeting, the Ministry of Economy and Finance also held a senior-level meeting regarding the Iran-Israel conflict, chaired by First Vice Minister Kim Beom-seok.

While assuring that the latest missile attack’s impact on the crude oil supply, trading and supply chain for the domestic economy has been limited so far, the ministry said that the vice minister requested relevant agencies, including the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea, to bolster monitoring.

Korea’s on-year growth in consumer prices slowed to 1.6 percent in September, the lowest since February 2021, primarily due to lower global prices.

Meanwhile, the government rolled out plans to drive domestic demand, which has been sluggish despite export growth and slowing inflation this year.

"Driven by robust exports, the economy has been recovering at a pace outrunning the potential growth rate; however, domestic demand remains relatively sluggish with diverging paces of growth per sector,” said the finance minister, adding that the government "will ramp up its efforts to boost domestic demand with tailored support plans for each segment.”

The plans include accelerating the commencement for pending projects worth 24.4 trillion won ($18.5 billion) by the end of the year, and facilitating the execution of the remaining 62 trillion won facility investment plans within the manufacturing sector out of the initially proposed 110 trillion won for this year.

The ministry will also extend the temporary 10-percent-point additional tax incentive for investments by small and medium-sized enterprises by a year until 2025.

To drive construction investments, the government aims to curb construction cost growth at around 2 percent a year from 2025 to 2026, significantly lower than the average of 8.5 percent of the past three years, by rooting out unfair practices in the industry and expanding the material supply.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]