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SERI hosts 2010 Korean Economic Forum

May 19, 2010

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SERI hosts 2010 Korean Economic Forum

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Entitled “Korea and Financial Policy in the G-20 Era” Samsung Economic Research Institute successfully hosted the 2010 Korea Economic Forum at the Lotte Hotel on May 19. The forum is an annual event held in cooperation with JoongAng Daily with the aim of raising economic awareness. Guests included diplomats, CEOs of both foreign and domestic companies and foreign correspondents. Ambassadors from the EU, Germany, Russia and Vietnam, and Chairman and CEOs from Kookmin Bank, Woori Bank, Renualt Samsung Motors, and Audi were just some of the honorable guests who attended Wednesdays' event.

The keynote speech was given by the Chairman of the Financial Services Commission, Chin Dong-Soo, who outlined major financial policy issues and tasks lying ahead. He talked of the Korean government's plans to formulate new financial policies within the context of the new global financial order which arose from the past financial crisis. The policies will focus on enhancing Korea 's financial capabilities and in line with this, the government will make efforts to elevate Korea's global status. Mr. Chin said that Korea recognizes its role in the new G-20 era, especially being the host of the upcoming G-20 Summit in November. He concluded his speech by describing how Korea is working to reinforce its financial system.

After a short Q&A session, the second session was led by SERI Vice President, Hwang In-Seong, who gave a presentation on the state of the Korean economy and the outlook for the second half of 2010. Dr. Hwang's presentation was divided into three parts; first was Korea 's current economic conditions, second was the economic outlook for the second half of 2010 and third, the implications. Korea 's economy is currently in a recovery phrase with the speed of recovery being faster than expected on the back of increased exports and facilities investments leading the upward trajectory. However, although Korea started the year posting a high growth of 7 percent year-on-year-growth, this is expected to decrease to 3.4 percent in the second half. The main reasons for the slow-down is the supply shortage in the semi-conductor market which was a major contributor to the fast growth and weaker effects of government measures. And finally the implications are that although the Korean economy will exceed its potential growth rate, the momentum will slow down in the second half and economic sentiment will also fall.

SERI Senior Vice President, Lee Keon Hyok, closed the session with a presentation on the progress and prospects for exit strategies. Dr. Lee began by explaining the three main strategies that were implemented to bring about the economic recovery, which were; aggressive cuts in interest rates, stabilization of financial markets and enhancement of financial soundness and aggressive fiscal stimulus. However, although Korea is still experiencing an ‘output gap,' which implies that there is excess capacity, the time has come to seriously consider exiting from the current situation. This is due to Korea 's high growth rate of 7.8 percent, Korea 's credit rating already reaching the pre-crisis level, and concerns over the financial health of the government which has been influenced by the financial instability in Europe. With such measures as the majority of liquidity being retrieved from the market, there has already been some progress. However, the need for an interest rate hike still remains which is an indicator to many as to when the exit strategies will be implemented. In terms of global exit strategies, there was a consensus at the recent G-20 meeting that different countries require different timing of exit. The prospect is a case of cost benefit; what is the cost of an interest rate hike now verses the benefits.

Finally, the morning rounded off with a Q&A session. The session gave the guests a chance to share their opinions on various matters and ask the panel an array of questions including the prospects of a tax rate increase and the implications of the declining labor market.

For further details on the presentations please click the PDF icon.

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