The South Korean economy is strong enough to ward off a financial crisis and reach 3 percent growth this year amid rising geopolitical tensions, a senior government official said Thursday.
"Due to escalating North Korean risks, some are concerned that the South Korean economy will be adversely affected," Vice Finance Minister Ko Hyoung-kwon told reporters. "No need to worry. The economy is on course for 3 percent growth, led by brisk exports."
Recently, some economists noted that Asia's fourth-largest economy may suffer another financial crisis like the one it experienced 20 years ago, as the latest North Korean provocations weigh more heavily on the economy. In 1997, South Korea saw its currency slump and stock markets and asset prices devalue along with other Asian countries, and it was forced to turn to a bailout package from the International Monetary Fund (IMF).
The vice finance minister stressed that there is a lower possibility that the South Korean economy will get entangled in a fresh financial crisis thanks to massive foreign reserves and less foreign debt.
"Twenty years ago, we had posted a current account deficit for years, but now we are enjoying a huge surplus in terms of our current account," said Ko. "Also, the financial market has been stable following the North Korean provocations and a week-long holiday."
He said it is more important for the country to deal with other issues, including chronic low growth and deepening polarization.
The South Korean government earlier forecast that the economy will expand 3 percent this year, and the IMF also said such growth is possible in its latest forecast released earlier this week.