IMF Says Room For Further Easing

The IMF has recommended that South Korea should enact more accommodative fiscal and monetary policies in a bid to accelerate its economic recovery from the pandemic related dip.

• Despite an increase in the budget deficit, the country also has fiscal room for increasing targeted support to people and businesses impacted by the outbreak, according to Andreas Bauer, Korea mission chief at the IMF.
• The IMF have concluded its Article IV mission to South Korea. "Given sizable economic slack and downside risks to the recovery, some additional fiscal and monetary policy accommodation would help the economy normalize faster and bring discouraged workers back to the labour market," Bauer said in a statement.
• Earlier this week, the IMF revised up its 2021 growth outlook for the South Korean economy to 3.1% from its October estimate of 2.9%.
• The country's government debt is expected to reach KRW 956tn this year, approximately KRW 150.8tn higher than last year. The country's debt-GDP ratio is expected to reach 47.3% in 2021, compared to around 40% before the pandemic. This is still some way off the 60% limit put forward in a proposal in 2020, the proposal also limits the fiscal deficit to 3% .
• The IMF also noted the BoK has room for additional easing amid subdued inflationary pressure, the main policy setting sits at a record low of 0.50%. "This could be achieved through a modest further easing, while forward guidance on the likely course of monetary policy could also help ease financial conditions currently," Bauer said.