South Korea’s government is more optimistic about the economy’s prospects than the central bank, striking a more upbeat tone as authorities move to further open the nation’s currency and financial markets to global investors.
In its economic growth strategy report for this year, the government forecast the economy would grow 2 percent, more than the Bank of Korea’s 1.8 percent estimate, the South Korean Ministry of Economy and Finance said in a statement Friday.
Consumer prices are predicted to rise 2.1 percent, the same pace as in last year, it added.
Photo: EPA
The brighter outlook is driven by firmer domestic consumption and stronger exports, led by semiconductors, while construction investment is expected to turn positive, First Vice Finance Minister Lee Hyoung-il said.
The government expects a current-account surplus of US$135 billion this year, up from an estimated US$118 billion last year, helped by improving trade terms as chip prices recover and energy costs ease.
Still, policymakers acknowledged longer-term constraints. The strategy warned that South Korea’s potential growth rate could fall toward 1 percent in the 2030s, and near zero in the following decade without structural reforms, underscoring the need to attract capital and boost productivity.
A central pillar for the plan is a sweeping overhaul of foreign-exchange market access.
The government said it would fully extend onshore foreign exchange trading to a 24-hour system from July, replacing the current structure that closes in the early hours of the morning, and improve links with overseas trading hubs and electronic currency platforms.
A roadmap to promote wider use of the won in international payments and offshore financial transactions would be finalized in the first half of the year.
The foreign exchange reforms are part of a broader push to attract foreign investment as South Korea pursues inclusion in global benchmarks such as MSCI Inc’s developed markets index. The government would complete its phased entry into the FTSE World Government Bond Index this year and continue efforts to align market infrastructure with international standards.
As part of those efforts, officials reiterated plans to establish a Korean sovereign wealth fund, with initial capital of about 20 trillion won (US$13.7 billion), drawing on government-held equity stakes and other assets. The fund would operate with independent decision-making and gradually expand its investment footprint, the strategy said.
With regards to financial stability, the government said it would maintain tight oversight of household debt while supporting growth, and is considering the creation of a dedicated real estate supervisory body.
Housing supply would be expanded alongside measures aimed at preventing the buildup of systemic risks tied to property prices and leverage.
The strategy reaffirmed the government’s industrial priorities, with artificial intelligence, semiconductors and advanced manufacturing positioned as key growth engines.
In digital finance, South Korea said it would move to formalize rules for stablecoins, including setting requirements for issuers and reserve assets, while pursuing the introduction of spot exchange-traded funds linked to digital assets, all steps aimed at bringing crypto markets further into the regulatory framework.
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