ID :
208821
Thu, 09/22/2011 - 11:51
Auther :
Shortlink :
https://oananews.org//node/208821
The shortlink copeid
Prepare for worsening global economy
SEOUL (Yonhap) - The International Monetary Fund (IMF) has warned the world economy that there are "accumulating signs of weakness in key advanced economies." The IMF said the world's economic situation has worsened further during the past several months, citing the European financial crisis and jitters about a slowdown in U.S. economy.
The eurozone countries are making efforts to save Greece from default but their efforts seem to be touch-and-go. The U.S. Federal Reserve announced a multi-billion dollar plan nicknamed "Operation Twist" to shore up the U.S. economy but it was met with worldwide disappointment.
The Fed said Wednesday it would shift $400 billion in its short-term debt portfolio holdings to longer-term bonds, a move it said would lower rates for mortgage holders and businesses. The plan would also entice banks to put some of their idle reserves to work.
International credit ratings agencies lowered the ratings of banks in the U.S. and Italy, heralding a risk of a bank crisis. The IMF warned that the world's banking system is in the worst shape since the financial crisis of 2008.
Such rising uncertainty in the world economy and banks is feared to deal a critical blow to the South Korean economy, which is highly dependent on outside economic situations.
The IMF adjusted down South Korea's economic growth rate for this year to 4.0 percent from 4.5 percent it projected in April on the grounds that there is a possibility that economies of the U.S. and eurozone countries may face recession again. Earlier, the Asian Development Bank also lowered Korea's economic growth rate for this year from 4.6 percent to 4.3 percent.
Local economic institutes also lowered growth predictions for next year. The Samsung Economic Research Institute came out with a 3.6 percent growth prediction, about 1 percentage point lower than the government's growth prediction of the middle 4 percent range.
The uncertainty in the local foreign exchange market is a bigger problem. The exchange rate of the Korean won against the U.S. dollar showed abnormal fluctuations recently following the reemergence of the concerns about Greece's default and the lowering of Italy's credit rating.
The won-dollar exchange rate soared to 1,149 won per dollar Wednesday, up 100 won from 1,050 won per dollar on July 27 when the rate was lowest this year.
European banks are likely to withdraw their money from the local securities market if their financial pinch is aggravated in the future while foreign investors may collect their investments in Korea.
The IMF advised South Korea to seek exchange rate flexibility to help curb short-term external liabilities. It also said South Korea needs to sustain monetary tightening.
The government should make every effort to have local banks secure foreign currency liquidity and prepare for the worst case scenario.
The eurozone countries are making efforts to save Greece from default but their efforts seem to be touch-and-go. The U.S. Federal Reserve announced a multi-billion dollar plan nicknamed "Operation Twist" to shore up the U.S. economy but it was met with worldwide disappointment.
The Fed said Wednesday it would shift $400 billion in its short-term debt portfolio holdings to longer-term bonds, a move it said would lower rates for mortgage holders and businesses. The plan would also entice banks to put some of their idle reserves to work.
International credit ratings agencies lowered the ratings of banks in the U.S. and Italy, heralding a risk of a bank crisis. The IMF warned that the world's banking system is in the worst shape since the financial crisis of 2008.
Such rising uncertainty in the world economy and banks is feared to deal a critical blow to the South Korean economy, which is highly dependent on outside economic situations.
The IMF adjusted down South Korea's economic growth rate for this year to 4.0 percent from 4.5 percent it projected in April on the grounds that there is a possibility that economies of the U.S. and eurozone countries may face recession again. Earlier, the Asian Development Bank also lowered Korea's economic growth rate for this year from 4.6 percent to 4.3 percent.
Local economic institutes also lowered growth predictions for next year. The Samsung Economic Research Institute came out with a 3.6 percent growth prediction, about 1 percentage point lower than the government's growth prediction of the middle 4 percent range.
The uncertainty in the local foreign exchange market is a bigger problem. The exchange rate of the Korean won against the U.S. dollar showed abnormal fluctuations recently following the reemergence of the concerns about Greece's default and the lowering of Italy's credit rating.
The won-dollar exchange rate soared to 1,149 won per dollar Wednesday, up 100 won from 1,050 won per dollar on July 27 when the rate was lowest this year.
European banks are likely to withdraw their money from the local securities market if their financial pinch is aggravated in the future while foreign investors may collect their investments in Korea.
The IMF advised South Korea to seek exchange rate flexibility to help curb short-term external liabilities. It also said South Korea needs to sustain monetary tightening.
The government should make every effort to have local banks secure foreign currency liquidity and prepare for the worst case scenario.
