S. Korean economy strong against global risks

By Joel Lee

South Korea’s economy will stay firm against global financial risk factors with strong fundamentals in foreign currency loan and liquidity position, the nation’s integrated financial regulator Financial Supervisory Service (FSS) projected Thursday.

Korea’s foreign exchange reserves is the world’s 7th largest, with a 29-months record streak of current account surplus, FSS reported. The amount is at $368 billion at the end of Aug, strengthening its foreign payment capacity.

Korean banks’ foreign exchange loans conversion rate in Aug showed short and long-term stability. Short-term conversation rate Jan-Aug was 98.3 percent while long-term rate was 83.3 percent.

The short-term average additional interest in Aug rose 4.1bp from previous month, with no change for the long-term.

However, if the potential risk factors surface simultaneously, the repercussions on the domestic and global market would be great, FSS said.

The risk factors stem from the possibility of America’s base rate early increasing; Chinese economy slowing down due to cooled real estate market and sluggish domestic consumption; Argentina entering default; and geopolitical tensions coming from Ukraine and the Middle East, among others.

The continued recession in Europe and Japan are delaying the prospects of global economic recovery, negatively weighing on the Korean economy which heavily relies on export.

In response, Korean financial authorities said they will tighten monitoring of financial markets at home and abroad and preemptively deal with the risks by taking progressive steps.