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Korea’s Economic Development and Policy Directions for 2004. 18 March 2004. Gwang Lim KIM Vice Minister Ministry of Finance and Economy Republic of Korea. Table of Contents. Recent Economic Developments II.Major Policy Directions for 2004 III.Current Issues & Policy Measures - PowerPoint PPT Presentation
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Korea’s Economic DevelopmentKorea’s Economic Developmentand Policy Directionsand Policy Directions forfor 2004 2004
Gwang Lim KIM
Vice Minister Ministry of Finance and Economy
Republic of Korea
18 March 2004
Table of ContentsTable of Contents
I.I. Recent Economic Developments Recent Economic Developments
II.II. Major Policy Directions for 2004Major Policy Directions for 2004
III.III. Current Issues & Policy MeasuresCurrent Issues & Policy Measures
IV.IV. Mid- to Long-term Growth StrategyMid- to Long-term Growth Strategy
3
GDP GrowthGDP Growth Industrial Output GrowthIndustrial Output Growth
3.7
1.93.1
6.3
2.3
0
1
2
3
4
5
6
7
01 02 03 1Q 03 2Q 03 3Q 034Q
Korean Economy On Track to RecoveryKorean Economy On Track to Recovery
14.4 15.9
25.6
32.7
45.9
8.0
20.7
0
10
20
30
40
50
02 03 1Q 03 2Q 03 3Q 03 4Q 04 Jan 04 Feb
6.1
3.2 3.2
7.8
4.8
0.7
8.0
0
2
4
6
8
10
01 02 03 1Q 03 2Q 03 3Q 03 4Q Jan 04
(%) (%)
3.8 (e)
ExportsExports FX ReservesFX Reserves
(%) (US$ bn)
74.0
96.0 102.8
121.4
155.4163
0
20
40
60
80
100
120
140
160
180
99 00 01 02 03 Feb 04
(US$ bn)
4
ConsumptionConsumption InvestmentInvestment
-3.4 -3.7
-7.0
-4.6-3.1
1.6
-2.3
-10
-8
-6
-4
-2
0
2
4
01 02 03 1Q 03 2Q 03 3Q 03 4Q Jan 04
Domestic Demand Remains SluggishDomestic Demand Remains Sluggish
1.5
-1.7-2.5 -2.2 -2.5
8.3
6.6
-4
-2
0
2
4
6
8
10
01 02 03 1Q 03 2Q 03 3Q 03 4Q Jan 04
(%) (%)
Consumer Sentiment IndexConsumer Sentiment Index
90.491.5
94.696
98 96.3
86889092949698
100
Sep 03 Oct Nov Dec Jan 04 Feb
Source: NSO
Business Survey IndexBusiness Survey Index
87
83
8685
87
91
78808284
86889092
Oct 03 Nov Dec Jan 04 Feb Mar
Source: BOK
Table of ContentsTable of Contents
I.I. Recent Economic Developments Recent Economic Developments
II.II. Major Policy Directions for 2004Major Policy Directions for 2004
III.III. Current Issues & Policy MeasuresCurrent Issues & Policy Measures
IV.IV. Mid- to Long-term Growth StrategyMid- to Long-term Growth Strategy
6
Fiscal Fiscal
PolicyPolicy
Fiscal Fiscal
PolicyPolicy
MonetaryMonetary
PolicyPolicy
MonetaryMonetary
PolicyPolicy
Exchange Rate Exchange Rate
PolicyPolicy
Exchange Rate Exchange Rate
PolicyPolicy
Expansionary Macro PolicyExpansionary Macro Policy
Frontload budget in 1H
Maintain low interest rates
Market determines FX rate
based on economic fundamentals
& demand and supply
7
Strictly apply laws and principles to illegal Strictly apply laws and principles to illegal activitiesactivities
Bring labor relations up to global standards by easing lay-off requirements
Strictly apply laws and principles to illegal Strictly apply laws and principles to illegal activitiesactivities
Bring labor relations up to global standards by easing lay-off requirements
Improve LaborImprove Labor
RelationsRelations
Improve LaborImprove Labor
RelationsRelations
Deregulation Deregulation Deregulation Deregulation
Remove regulations that hinder investment, bringing real benefits to companies.
Form a task force to review financial regulations and supervision
Remove regulations that hinder investment, bringing real benefits to companies.
Form a task force to review financial regulations and supervision
Boosting InvestmentBoosting Investment
Promote investment
Create jobs
→→Elevate income-earning capacity
Resolve credit delinquents and unemployment issues→
Table of ContentsTable of Contents
I.I. Recent Economic Developments Recent Economic Developments
II.II. Major Policy Directions for 2004Major Policy Directions for 2004
III.III. Current Issues & Policy MeasuresCurrent Issues & Policy Measures
IV.IV. Mid- to Long-term Growth StrategyMid- to Long-term Growth Strategy
9
The National Assembly Voted to Impeach President RohThe National Assembly Voted to Impeach President Roh
President Roh’s executive authority has been suspended and taken over President Roh’s executive authority has been suspended and taken over immediately by Prime Minister Goh Kunimmediately by Prime Minister Goh Kun
The Constitutional Court will now make a final decision on the impeachment
The National Assembly Voted to Impeach President RohThe National Assembly Voted to Impeach President Roh
President Roh’s executive authority has been suspended and taken over President Roh’s executive authority has been suspended and taken over immediately by Prime Minister Goh Kunimmediately by Prime Minister Goh Kun
The Constitutional Court will now make a final decision on the impeachment
Resilience to Political Uncertainty Resilience to Political Uncertainty
The Decision has Limited Impact on the Korean EconomyThe Decision has Limited Impact on the Korean Economy
Korea has established a mature and stable economic system, and has Korea has established a mature and stable economic system, and has demonstrated its resilience to a variety of economic shocksdemonstrated its resilience to a variety of economic shocks
The government will remain fully committed to pushing forward with its current economic policies and structural reform
The Decision has Limited Impact on the Korean EconomyThe Decision has Limited Impact on the Korean Economy
Korea has established a mature and stable economic system, and has Korea has established a mature and stable economic system, and has demonstrated its resilience to a variety of economic shocksdemonstrated its resilience to a variety of economic shocks
The government will remain fully committed to pushing forward with its current economic policies and structural reform
10
Minimize the Minimize the
negative effects negative effects
on other financial on other financial
sectors and the sectors and the
real economyreal economy
Minimize the Minimize the
negative effects negative effects
on other financial on other financial
sectors and the sectors and the
real economyreal economy
Credit Card CompaniesCredit Card Companies
LG CardLG CardLG CardLG Card
Other Card CompaniesOther Card CompaniesOther Card CompaniesOther Card Companies
Strengthened Monitoring & Improved SystemStrengthened Monitoring & Improved SystemStrengthened Monitoring & Improved SystemStrengthened Monitoring & Improved System
Restructuring process is underwayRestructuring process is underway
- Merging with affiliated financial institutions, - Merging with affiliated financial institutions,
recapitalization, etc.recapitalization, etc.
Restructuring process is underwayRestructuring process is underway
- Merging with affiliated financial institutions, - Merging with affiliated financial institutions,
recapitalization, etc.recapitalization, etc.
Monitor the management of card companies on a Monitor the management of card companies on a continuous basiscontinuous basis
Strengthen the supervisory system related to the Strengthen the supervisory system related to the management of credit card companiesmanagement of credit card companies
Monitor the management of card companies on a Monitor the management of card companies on a continuous basiscontinuous basis
Strengthen the supervisory system related to the Strengthen the supervisory system related to the management of credit card companiesmanagement of credit card companies
Finalized Restructuring Plan (Jan. 2004)Finalized Restructuring Plan (Jan. 2004)- Business normalization is currently underway by KDB- Business normalization is currently underway by KDB
Will be sold after business normalizationWill be sold after business normalization
Finalized Restructuring Plan (Jan. 2004)Finalized Restructuring Plan (Jan. 2004)- Business normalization is currently underway by KDB- Business normalization is currently underway by KDB
Will be sold after business normalizationWill be sold after business normalization
11
Soft-landing for Household DebtSoft-landing for Household DebtSoft-landing for Household DebtSoft-landing for Household Debt
Support for Credit DelinquentsSupport for Credit DelinquentsSupport for Credit DelinquentsSupport for Credit Delinquents
Manage household loans at an appropriate level & Manage household loans at an appropriate level & Encourage conversion of short-term to long-term loansEncourage conversion of short-term to long-term loans
- Establish Korea Housing Finance Corp. (Mar. 2004)- Establish Korea Housing Finance Corp. (Mar. 2004)
Develop a loan screening system based on income and Develop a loan screening system based on income and repayment abilityrepayment ability
- Build infrastructure such as individual credit DB- Build infrastructure such as individual credit DB
Manage household loans at an appropriate level & Manage household loans at an appropriate level & Encourage conversion of short-term to long-term loansEncourage conversion of short-term to long-term loans
- Establish Korea Housing Finance Corp. (Mar. 2004)- Establish Korea Housing Finance Corp. (Mar. 2004)
Develop a loan screening system based on income and Develop a loan screening system based on income and repayment abilityrepayment ability
- Build infrastructure such as individual credit DB- Build infrastructure such as individual credit DB
Activate systems to support credit delinquents who Activate systems to support credit delinquents who borrowed from multiple financial institutionsborrowed from multiple financial institutions
Carefully select candidates to prevent moral hazardCarefully select candidates to prevent moral hazard
Activate systems to support credit delinquents who Activate systems to support credit delinquents who borrowed from multiple financial institutionsborrowed from multiple financial institutions
Carefully select candidates to prevent moral hazardCarefully select candidates to prevent moral hazard
Promote Promote
stability in the stability in the
financial market financial market
and prevent and prevent
systemic riskssystemic risks
Promote Promote
stability in the stability in the
financial market financial market
and prevent and prevent
systemic riskssystemic risks
Household Debt & Credit DelinquentsHousehold Debt & Credit Delinquents
12
Meaningful Progress at the Second Round of Six-Party TalksMeaningful Progress at the Second Round of Six-Party Talks
All parties expressed their commitment to a nuclear-weapon-free Korean All parties expressed their commitment to a nuclear-weapon-free Korean Peninsula, and to resolving the nuclear issue peacefullyPeninsula, and to resolving the nuclear issue peacefully
Agreement to establish a working group and to hold the next round of talks no later than the end of second quarter of this year
Meaningful Progress at the Second Round of Six-Party TalksMeaningful Progress at the Second Round of Six-Party Talks
All parties expressed their commitment to a nuclear-weapon-free Korean All parties expressed their commitment to a nuclear-weapon-free Korean Peninsula, and to resolving the nuclear issue peacefullyPeninsula, and to resolving the nuclear issue peacefully
Agreement to establish a working group and to hold the next round of talks no later than the end of second quarter of this year
The North Korean Nuclear IssueThe North Korean Nuclear Issue
Likelihood of Peaceful and Diplomatic ResolutionLikelihood of Peaceful and Diplomatic Resolution
Korea and the U.S share a very clear vision for Korea and the U.S share a very clear vision for dismantlement of North Korea’s nuclear program
The Korean government will continue to induce a positive stance from North Korea, while maintaining close coordination with U.S and Japan
Likelihood of Peaceful and Diplomatic ResolutionLikelihood of Peaceful and Diplomatic Resolution
Korea and the U.S share a very clear vision for Korea and the U.S share a very clear vision for dismantlement of North Korea’s nuclear program
The Korean government will continue to induce a positive stance from North Korea, while maintaining close coordination with U.S and Japan
Table of ContentsTable of Contents
I.I. Recent Economic DevelopmentsRecent Economic Developments
II.II. Major Policy Directions for 2004Major Policy Directions for 2004
III.III. Current Issues & Policy MeasuresCurrent Issues & Policy Measures
IV.IV. Mid- to Long-term Growth StrategyMid- to Long-term Growth Strategy
14
Expanding Mid- to Long-term Growth PotentialsExpanding Mid- to Long-term Growth Potentials
Build Northeast Asian Business Hub
- Develop Free Economic Zones
- Focus on strategies to make Korea a financial and logistics hub of NE Asia
Foster Services Industries- Further liberalize services market & attract foreign investment
- Ease regulations regarding services industries
Continue Market Reforms
-Execute the 3-Year Market Reform Plan, outlined late last year
Formulate Innovative Growth Strategy- Nurture top 10 growth drivers of next generation
- Accelerate technological innovation for high value-added industry
15
Develop asset management Develop asset management industry as a key driverindustry as a key driver
Develop asset management Develop asset management industry as a key driverindustry as a key driver
Enhance the attractiveness of Enhance the attractiveness of financial markets by developing financial markets by developing fixed income, equity and foreign fixed income, equity and foreign exchange marketsexchange markets
Enhance the attractiveness of Enhance the attractiveness of financial markets by developing financial markets by developing fixed income, equity and foreign fixed income, equity and foreign exchange marketsexchange markets
Foster regional leadership by Foster regional leadership by establishing a Korea Investment establishing a Korea Investment Corporation (KIC) and developing Corporation (KIC) and developing specialized areas (restructuring, specialized areas (restructuring, infrastructure financing)infrastructure financing)
Foster regional leadership by Foster regional leadership by establishing a Korea Investment establishing a Korea Investment Corporation (KIC) and developing Corporation (KIC) and developing specialized areas (restructuring, specialized areas (restructuring, infrastructure financing)infrastructure financing)
A “Niche Financial Hub” Focusing on Asset ManagementA “Niche Financial Hub” Focusing on Asset Management
Attract advanced foreign Attract advanced foreign financial institutionsfinancial institutions
Attract advanced foreign Attract advanced foreign financial institutionsfinancial institutions
Financial HubFinancial HubFinancial HubFinancial Hub
Reinforce Reinforce competitiveness of competitiveness of domestic financial domestic financial
institutionsinstitutions
Reinforce Reinforce competitiveness of competitiveness of domestic financial domestic financial
institutionsinstitutions
Thank you!